Solomon Lew and his Premier Investments are engaging in a bit of opportunistic bottom fishing to try and snap up fashion retailer, Just Group.
Lew, who yesterday was re-appointed chairman of Premier, replacing Sir Ron Brierley, is offering a maximum of $898 million in shares and cash for Just.
Premier already controls 22.8% of Just, which gives him a foot on the neck of the target: and his private companies won’t accept until they are in a position to give him more than 50%, which would mean the bid succeeds as it has a minimum acceptance condition of 50%.
In the takeover offer Premier helpfully points out to Just shareholders that the company’s shares have dropped by a third since the peak last August, while the ASX 200 retail index is off 32.7% and the ASX 300 Industrials Index is down 22%.
Premier itself had fallen more than 20%, so Just Group isn’t alone in suffering a decline in value.
But Just shares peaked at $5.97 in a mixture of speculation that Mr Lew was going to bid, and claims of private equity interest, which was never on, given his blocking stake.
The offer crystalises long-held speculation that Mr Lew was interested in moving from being a shareholder to full control. That suggestion was given impetus last year when Premier and Mr Lew sold their Coles shares to Wesfarmers, a move which gave it the inside running to successfully complete the deal.
Premier and Mr Lew received well over $1 billion in cash and Wesfarmer’s shares and he is redeploying that cash into Just Group, for which the cash component of the offer of $2.20 per Just share is being financed out of reserves, presumably the Coles cash.
Premier grabbed 1.85 million shares, or 0.9% of Just’s register, in an off-market trade yesterday morning at $3.50 per share and then Just shares jumped to a high of $3.98, but ended up 44c at $3.96. Premier shares were steady at $7.90 and after falling to $7.25.
There wasn’t a stampede of buyers or sellers in Just: around three million shares were traded, from the point of view of hedge funds and other punters it seems all over.
Mr Lew already controls 22.8% of Just’s register through his investment vehicle Metrepark.
The Premier offer values Just at between $4.11 and $4.46 per share, with an offer of $2.20 cash, including the 10.5c per share interim dividend declared by Just Group on March 5, and 0.25 Premier shares for each Just share.
The Premier claims its offer represents an implied premium of 16.9% to 26.8% to the Just Group closing share price of $3.52 last Friday, March 28.
The Premier offer is not subject to any regulatory approval or financing conditions.
"This offer provides Just Group shareholders with an attractive premium, substantial cash value, as well as a continuing stake in the future growth of Just Group and the potential upside of Premier through a generous scrip component," Mr Lew said in a statement.
"At a time of significant economic uncertainty and market volatility, the combined elements of cash and Premier scrip in this offer are compelling for Just Group shareholders."
Premier said its $2.20 per share cash offer gives Just shareholders an opportunity to realise a substantial immediate cash amount for part of their investment in Just Group in a time of increased share market volatility, declining consumer confidence and escalating uncertainty for the outlook of the Australian, New Zealand and international economies.
"Essentially, it offers Just Group shareholders the opportunity to de-risk part of their shareholdings in Just Group based on a valuation at an attractive premium to prevailing trading prices," Premier said.
With more than 800 shops in Australia and New Zealand, Just’s stable includes Just Jeans, Jay Jays, Dotti, Portmans, Jacqui E, Peter Alexander and Smiggle.
Mr Lew already controls the Nine West chain of fashionwear and shoes. He had a blocking stake in Colorado but sold out for a higher price. He also has a small but not influential stake in Country Road which he is hanging on to. He sold Witchery to private equity buyers.
Premier controls 26.9 million shares in the listed Housewares International, which has been struggling in recent years as retailers bypass wholesalers like it and import direct from China and other sources.
