David Jones, the Australian department store operator that was discussing a merger with rival Myer, has issued the surprise announcement that it plans to recommend a rival offer from South African retailer Woolworths instead.
David Jones told shareholders that in the absence of an independent expert objecting to the deal, its board would unanimously recommend the A$4 per share cash offer from the South African merchandiser, which sells similar upmarket food and mid-priced clothing ranges to the UK’s Marks & Spencer.
Woolworths’ bid comes at a 25.4 per cent premium to David Jones’ closing price on April 8. It implies a market capitalisation for the Aussie retailer of A$2.1bn. In addition to the A$4 per share, investors will receive a fully franked, A$0.10 per share dividend already declared by David Jones.
The Australian company’s chairman Gordon Cairns said:
This is a compelling proposal which represents a significant premium to not only our intrinsic value but also to broker valuations and to recent share prices.
The last time David Jones updated investors on its sale process was in late March, when it said it had hired advisers to consider a merger proposal from Myer.
The Woolworths deal will be put to a shareholder vote and requires 75 per cent approval.
It will also need to be reviewed by Australia’s Treasurer, Joe Hockey.
Woolworths also needs permission to go ahead with the deal from the South African Reserve Bank.
In Wednesday’s statement, David Jones’ Cairns added:
The board has considered a number of alternatives, including standalone value creation opportunities; realising the value of the freehold properties owned by David Jones; or pursuing a merger with Myer.
The board has unanimously concluded that the Woolworths offer is a compelling option.