The Federal Court has approved South Africa’s Woolworths Holdings takeover of department store retailer, David Jones Limited (ASX: DJS), despite some last minute wrangling.
The Australian Securities and Investments Commission (ASIC) announced that it would withhold its consent for the deal, after raising concerns that Woolworths parallel takeover offer for Country Road Limited (ASX: CTY) constituted an inducement to get Solomon Lew on board for the David Jones takeover. After a short recess, the judge rejected ASIC’s argument, and approved the deal.
Mr Lew’s private investment company emerged with a 9.9% stake in David Jones in early June, sparking fears that he would block the Woolworths deal, unless it bought him out of Country Road. Mr Lew holds an 11.9% stake in Country Road, with Woolworths holding 87.9%. Mr Lew is also chairman and a substantial shareholder of fashion retailer Premier Investments Ltd (ASX: PMV).
After making the $4.00 per share bid for David Jones, Woolworths also made an offer of $17 per share for the Country Road shares it didn’t already hold. That was a significant premium to the Country Road share price of $4.83 in early January, (although it had risen to $14 in mid-June), but at a price of 30 times last year’s earnings.
David Jones shares will now cease trading on the ASX on Friday July 18, with shareholders receiving $4.00 in cash per share, likely in early August.
It remains to be seen whether Mr Lew will accept the $17 bid for his Country Road shares, but given the substantial premium, it seems highly likely that Country Road will also disappear from the ASX. So far newspaper reports suggest the two party’s advisors have held talks, but no agreement had yet been reached.
Both acquisitions should be wonderful for Woolworths, but could cause issues for rival Myer Holdings Limited (ASX: MYR) and other retailers selling Country Road clothing. Shoppers may find they can only purchase Country Road gear from David Jones in future.
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Motley Fool writer/analyst Mike King doesn't own shares in any companies mentioned. You can follow Mike on Twitter @TMFKinga