The Motley Fool

Bye-bye David Jones Limited: Takeover approved

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.

If you were wondering what to buy with your David Jones proceeds, here it is...

Every year, Motley Fool investment advisor Scott Phillips hand-picks 1 ASX dividend stock with outstanding potential. Just click here to download your free copy of "The Motley Fool's Top Dividend Stock for 2014-2015" today.

Motley Fool writer/analyst Mike King doesn't own shares in any companies mentioned. You can follow Mike on Twitter @TMFKinga

NEW. Five Cheap and Good Stocks to Buy in 2019…

Our Motley Fool experts have just released a brand new FREE report, detailing 5 dirt cheap shares that you can buy today.

One stock is an Australian internet darling with a rock solid reputation and an exciting new business line that promises years (or even decades) of growth… while trading at an ultra-low price…

Another is a diversified conglomerate trading near a 52-week low all while offering a 2.8% fully franked yield…

Plus 3 more cheap bets that could position you to profit over the next 12 months!

See for yourself now. Simply click the link below to scoop up your FREE copy and discover all 5 shares. But you will want to hurry – this free report is available for a brief time only.

CLICK HERE FOR YOUR FREE REPORT!