Myer Holdings Ltd (ASX: MYR) and Premier Investments Limited (ASX: PMV) shares are having a strong session on Tuesday.
In morning trade, the Myer share price is up 5% to $1.02 and the Premier Investments share price is up 15% to $35.67.
Why are Myer and Premier Investments shares roaring higher?
Investors have been buying both sets of shares today after the two companies announced an agreement to merge some of their retail operations.
According to the release, Myer will acquire Premier's Apparel Brands business in Australia and New Zealand in exchange for the issue of new shares.
The Apparel Brands business comprises Just Jeans, Jay Jays, Portmans, Dotti, and Jacqui E.
Upon completion, the combined entity will have $4 billion revenue and $152 million EBIT on a pro forma FY 2024 basis. It will also have a combined footprint of 783 stores and a workforce of approximately 17,300 employees.
What's the deal?
The two parties have agreed on a deal that will see 890.5 million new fully paid ordinary shares in Myer distributed to Premier Investments. This equates to a total consideration of approximately $864 million based on yesterday's close prices.
Premier Investments then plans to distribute its existing and new shareholding in Myer to Premier shareholders by way of a combination of an in specie capital return and in specie dividend.
This will see each eligible Premier shareholder receive approximately 7.2 Myer shares for every Premier share held. These shareholders will then collectively own 51.5% of the department store operator's enlarged share base.
And while Premier Investments will no longer have an ownership, its chair Solomon Lew will be Myer's largest individual shareholder through Century Plaza Group. Lew will also join the Myer board.
What's left of Premier Investments?
Peter Alexander and Smiggle will be leftover and comprise its Premier Retail business after completion of the transaction. It will also continue to own its strategic stake in Breville Group Ltd (ASX: BRG) and real property assets.
Commenting on the transaction, Solomon Lew said:
This is an opportunity for our team and our shareholders to play an important role in the future of the Australian and New Zealand retail landscape. Myer and our Apparel Brands will be stronger together – delivering vertical integration, scale, additional margins and loyalty opportunities. Meanwhile, Premier's Board will be focused on the ongoing growth and performance of Smiggle and Peter Alexander, including as they pursue local and international growth opportunities.
