Cape Town - As Woolworths chief executive Ian Moir prepared to close the biggest deal of his life -- the $2 billion (R21 billion) acquisition of Australian retailer David Jones - he was hospitalised for back surgery.
“I had put it off and put it off but I couldn’t put it off any longer,” Moir, 55, said of the operation in an interview yesterday in the South African retailer’s flagship store in Cape Town.
“It wasn’t great timing but it didn’t have any effect. The anesthesia wears off after a couple of days. I wasn’t making deals while I was under the influence of drugs.”
Moir’s resilience paid off when the takeover of Australia’s oldest department store - identified as a target about 18 months ago - was completed on August 1.
The transaction creates a southern-hemisphere retail giant with combined revenue of 58 billion rand from more than 1,150 stores throughout Africa and Australia that can compete with Inditex SA’s Zara and Hennes & Mauritz AB, which are based in Europe.
Woolworths plans to sell 10 billion rand of shares to repay a loan taken to help fund the deal, the retailer said in a statement today.
The rights offer will be underwritten by units of Citigroup, JP Morgan Chase & Co. and Standard Bank, with the full terms to be released September 2.
‘Handsome Sum’
Moir’s health problems weren’t the biggest obstacle he had to overcome: Australian billionaire Solomon Lew, who spent 17 years blocking Woolworths from taking full control of clothing retailer Country Road through an 11.9 percent holding, amassed a stake in David Jones that was potentially large enough to prevent the deal.
Lew didn’t exercise that option after Woolworths agreed to pay him about A$209 million ($197 million) for his Country Road stake, or A$17 a share.
“I have got to take my hat off to him,” said Moir, who has never spoken to Lew, a former board member of the Reserve Bank of Australia, despite several efforts to set up a meeting during the decade Moir spent as chief executive of Country Road.
“He managed the process well. He got a good deal out of it and he walked away with a handsome sum of money.”
Moir denied overpaying Lew, saying an independent evaluator found Country Road’s shares were worth A$16 each, and that excludes A$30 million in savings Woolworths will realise from the acquisition.
“We certainly got a share that was worth more than A$17 to us,” he said.
“It was win-win. We wanted him out. It wasn’t us doing a side deal, or seeking to get him out of the way so the David Jones deal could go through.”
Stock Performance
Moir, who was born in Scotland and is also an Australian national, took over as Woolworths chief executive from current Chairman Simon Susman in November 2010.
Since then, the retailer’s share price has jumped 188 percent, compared with a 66 percent gain in the FTSE/JSE General Retailers Index.
Woolworths was unchanged at 79.06 rand at 2:47 pm in Johannesburg.
Woolworths said yesterday that sales gained 13 percent to 39.9 billion rand in the 52 weeks ended June 29 as it won customers and opened more outlets.
Diluted earnings per share rose 9.5 percent to 3.63 rand.
The Cape Town-based company isn’t related to Woolworths, the supermarket chain that’s Australia’s biggest retailer.
Moir plans to bring down prices at David Jones through more own-label sales, while introducing a loyalty-card program and boosting online revenue.
He expects to save at least 1.3 billion rand annually in five years.
Pledge ‘Confidence’
“Woolworths has been delivering on what it promised to achieve in Australia through Country Road after the Witchery and Mimco acquisitions, and this gives confidence it will also do so with David Jones,” BPI Capital Africa analyst Luis Colaco said by phone.
“The synergies it said it planned to achieve have not changed, even after buying the rest of Country Road, which is also a good sign.”
Moir, who is based in Cape Town, said he plans to spend about half his time in Australia over the next 18 months to bed down the acquisition, which will probably be his last for the foreseeable future.
“I think my boss has taken my checkbook away,” he said.
“We have taken real risk here, but for real return and it’s a managed risk that we all understand.” - Bloomberg News