David Jones Set For $2.1 Billion Takeover By Woolworths Of South Africa

Getty/ Graham Denholm

Australian retailer David Jones is in talks to be bought by South African chain Woolworths for $4 a share, a 25% premium on the closing price yesterday.

The deal values the company at over $2.1 billion, and the board is recommending shareholders accept the offer.

“In the absence of a superior proposal and subject to an independent expert concluding that the [Woolworths] Scheme is fair and reasonable and in the best interests of David Jones shareholders, the Board of David Jones unanimously recommends that David Jones shareholders vote in favour of the Scheme,” the company said in an ASX statement.

Woolworths of South Africa already has a significant presence in Australia, as it owns Country Road, Witchery and Mimco.

David Jones, which has had a tumultuous six months, recently rejected a merger proposal with its main competitor, Myer on the grounds that it offered no premium.

Chief executive Paul Zahra, who only months ago had decided to leave the company but was convinced to stay after board changes, said: “I am pleased that the Woolworths proposal recognises the attractive outlook for David Jones including the benefits that have and will flow from the continued implementation of our Future Strategic Direction Plan. The Woolworths proposal is an endorsement of our Future Strategic Direction Plan and our management team.”

Woolworths CEO Ian Moir said the merger would “create a leading southern hemisphere retailer with meaningful scale, able to leverage common fashion seasonality with enhanced sourcing capability”. It would lead to “a greatly enhanced value proposition, delivering on-trend product within the most exciting and innovative shopping experience in the market”.

DJs says the $4-a-share represents a 39.4% premium to its price on 30 January, before the Myer proposal became public. It’s also a multiple of 20.8x the reported FY13 EPS of 19.2c, and 23.8x the estimated FY14
EPS of 16.8c per share based on broker forecasts. It gives the company an implied market cap of A$2.149 billion.

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