Media business writers frothed and chortled this morning, forecasting that Melbourne businessman Solomon Lew would either block the David Jones (DJS) takeover offer from Woolworths of South Africa, or try a bit of greenmail to grab control of Country Road (CTY), which is also owned by Woolworths.
The one thing which is certain is that if he tries to block the David Jones takeover offer at $4 a share, and succeeds, the company’s share price will collapse, leaving him stranded and losing money.
Mr Lew confirmed yesterday that he has boosted his stake in David Jones to 9.9%, which could be enough to block the $2.15 billion offer from Woolworths, whose shareholders approved the bid on Tuesday in South Africa, and an associated rights issue to help fund the transaction.
Mr Lew’s privately owned Australian Retail Investments announced it had a 9.89% in David Jones after buying 53.11 million shares worth around $200 million, culminating with a huge $100 million purchase on June 16. That built on the original stake of 3.5 million shares.
Investors kept David Jones shares under the $4 offer price yesterday. They ended at $3.90, up half a per cent. Country Road shares were not traded (there are very few shares held outside Woolworths and Mr Lew’s companies) and ended at $13.40. They jumped 7.2% on Tuesday as news of Mr Lew’s buying spread among traders.
DJS 1Y – Lew increases David Jones stake
Now the speculation from the media (helped by ‘friends of both sides among advisers and investment banks) will continue at a high level until the DJ’s shareholder meeting on June 30.
The substantial shareholder notice issued by David Jones to the ASX shows Mr Lew’s Australian Retail Investments vehicle as the owner of 9.89% of David Jones shares.
The notice reveals the company, on behalf of Mr Lew, started buying shares on May 9 with a purchase of 3.5 million shares.
Other purchases were sprinkled through late May and early June before ARI scooped up 26.8 million shares worth $104 million on June 16.
Mr Lew and his advisers now have 13 days to derail the Woolworths takeover bid, with David Jones shareholders to meet in Sydney on June 30 to vote.
The deal must be supported by 75% of shares voted at the meeting to succeed, meaning a 25% ‘no’ vote can spoil the deal, as we saw with Nexus Energy last week, but probably won’t see with the adjourned Westfield Retail Trust meeting in Sydney on Friday.
Mr Lew owns 11% of Country Road and has long tried to buy Woolworths’ stake, without success.
Country Road’s performance here and in South Africa has improved dramatically in the past three years, helped in the past year or so by the acquisition of the Witchery chain from private equity owners, and the Mimco chain from a Melbourne owner.
Mr Lew could be after a premium buyout from Woolworths of his Country Road stake, or he could be trying to grab control of the retailer which has become one of the better performing retailers in this country in the past year or so.
Before private equity bought Witchery (from Gresham, part owned by Wesfarmers, which controls Coles and other retailers) it was owned by Mr Lew, who sold it for $132 million. Country Road bought the Mimco chain from a Melbourne family for $40 million.
Country Road’s shares were at $3.29 when it bought both chains for $172 million in 2012. Country Road raised $92 million from shareholders, including Mr Lew’s company, Premier Investments.
In fact Country Road shares have jumped from around $5 at the start of this year to a high of around $15 before easing to yesterday’s close.
They are up 400% since 2012, thanks to the purchases, improved trading conditions in Australia and a successful expansion into South Africa.
Premier’s shares closed at $8.47 yesterday, up 2.8%. They have doubled since 2012, meaning Country Road and its Woolworth managers have a better performance.
PMV vs CTY 1Y – Country Road outperforms Lew’s Premier Investments
