Woolworths should provide an independent valuation of Country Road due to concerns that investor Solomon Lew might benefit unfairly from selling the JSE-listed firm his stake in the Australian apparel retailer, Australian regulators said yesterday.
The Australian Securities and Investments Commission (Asic) raised its concern about Woolworths’s A$213 million (R2.1bn) offer to buy the billionaire investor’s 11.88 percent stake in Country Road in a federal court application yesterday.
Lew, who has refused to sell his stake in Woolworths’s majority owned Country Road since 1997, has amassed a holding of about 10 percent of Australian department store David Jones, raising speculation that Woolworths offered to buy his Country Road stake at an inflated price to convince him to sell his David Jones stake.
“Despite having 17 years to do so, Woolworths did not decide to make the [Country Road] takeover offer until Lew acquired a material stake in David Jones,” the regulator said in its court submission.
“The offering or giving of any [benefits not available to other David Jones shareholders] would be expressly prohibited in the analogous circumstances of a takeover bid.”
The Asic court application is the latest in an increasingly complex and personal saga but is not expected to derail Woolworths’ A$2.15bn (R22bn) bid for David Jones, Australia’s second-largest retailer.
David Jones has already postponed by two weeks its shareholder vote on the deal. It said yesterday that the vote would go ahead on July 14.
Calling for an independent valuation of Country Road shares, which in January were worth a third of the A$17 a share that Woolworths is offering Lew, Asic said it was “concerned that the consideration to be received by Lew under the [Country Road] takeover offer offends the equality of opportunity principle enshrined in… the Corporations Act”.
Country Road is trading at almost 30 times its trailing 12-month earnings, compared with David Jones at 23 times and rival Myer at 12 times.
Woolworths should provide a report that included an “expert valuation of the Country Road shares that are to be acquired… to ensure shareholders are provided with full, fair and meaningful information concerning the nature and magnitude of relevant benefits receivable by Mr Lew”. - Reuters