Sydney - Australian billionaire Solomon Lew has spent 17 years blocking JSE-listed Woolworths from taking full control of an Aussie fashion chain. His intransigence is set to earn him a A$209 million (R2.1 billion) payout.
Woolworths would pay A$17 a share to buy out Lew and other minority shareholders in clothing retailer Country Road, the Cape Town-based suitor said yesterday. That deal will only go ahead if Lew and other shareholders in David Jones support Woolworths’s separate $2bn (R21bn) bid for their company.
Offering A$17 each for shares bought for less than A$4 will provide an additional inducement for Lew to accept Woolworths’s bid for David Jones. He has blocked the South African retailer from taking full control of Country Road since 1997 through an 11.9 percent holding. A shareholder vote on the David Jones deal was delayed last week to assess the implications of him assembling a 9.9 percent stake.
Lauren Thompson, a spokeswoman for Lew at Domestique Consulting in Sydney, declined to comment.
“I’m not convinced this is in the best interest of Woolworths shareholders,” Bruce Main, a fund manager at Ivy Asset Management, said. He said he was considering selling his Woolworths shares.
“I’m worried Woolworths has overpaid and it’s then difficult to get decent returns. This smells more like ego than logic.”
Woolworths shares slid 1.35 percent to close at R77.35 on the JSE yesterday. The South African company is not related to the Woolworths supermarket chain that is Australia’s biggest retailer.
David Jones climbed 4 percent to A$3.94 in Sydney trading. Country Road rose 17 percent to a record A$16.40, with just 652 shares changing hands in a stock that is 99.8 percent controlled by Woolworths and Lew, according to data compiled by Bloomberg.
“This is a common-sense and timely opportunity to seek to reach full ownership,” Woolworths chief executive Ian Moir said in the statement. “If successful, the offer will allow Woolworths to delist Country Road, simplify its group structure and fully integrate the businesses.”
Lew spent about A$209m buying 53 million shares in David Jones between May 9 and June 16, according to a June 18 regulatory statement. His Australian Retail Investments vehicle, which holds his 11.9 percent Country Road stake, has clashed with Woolworths since losing out to the South African company in a 1997 takeover battle for the chain.
Moir, a former chief executive of Country Road, wants to take on fast-fashion retailers such as Inditex and Hennes & Mauritz through his takeover of David Jones, Australia’s largest department store chain by market value.
In an April 9 media call announcing the bid, he promised to bring management expertise from the apparel chain to David Jones, which has 38 department stores throughout Australia.
“We sell more online in Country Road than David Jones does,” he said. “We’ll bring those systems, those processes, those skills to bear within the David Jones environment.”
At least 75 percent of votes cast at a July 14 shareholder meeting must support the David Jones offer if it is to push through. The low turnout at such meetings gives Lew an opportunity to block any deal even if he has less than 25 percent of David Jones shares, the Australian newspaper reported on June 17 without saying where it got the information.
Chris Gilmour at Absa Investments said Woolworths had nothing to lose in this new offer. “They did not want to pay up in order to get rid of the minority. But they obviously have done their homework and they feel that by paying up and getting rid of the troublesome minority, it’s worth the price.”
He also believed that Lew did not “have much interest in retail anymore and that was because they sold the Witchery business to Woolworths”. If he did, Gilmour believed he would have held onto Witchery. He said Lew added nothing worthwhile in all these deals, he only detracted, and would make a lot of money out of them.
“What he might do is to sell his stake in Country Road and maybe David Jones as well. I’ll be surprised if he holds onto any of the shares any longer.” – Bloomberg. Additional reporting by Nompumelelo Magwaza