Australian tycoon may scupper Woolworths’ David Jones deal

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BR Solomon  16498 Bloomberg Australian investor Solomon Lew. Photo: Bloomberg

Sydney - Solomon Lew, an Australian billionaire investor, bought 9.9 percent of David Jones, threatening a $2 billion (R21.5bn) bid by Woolworths Holdings.

Lew, a billionaire former board member of Reserve Bank of Australia, spent about A$209 million (R2bn) buying 53 million shares in the Australian department-store chain between May 9 and Monday, according to a regulatory statement yesterday. The offer by Woolworths needs the votes of 75 percent of David Jones shareholders attending a June 30 meeting to go ahead.

“With that amount of skin in the game he certainly has a seat at the table,” Evan Lucas, a market strategist at IG, said from Melbourne. “He is incredibly savvy at doing this. He has got a very definite end game and somehow he will get it.”

Lew has blocked Woolworths from taking full control of Australian apparel store Country Road since 1997 through a stake of about 12 percent held by his company Australian Retail Investments. He has not disclosed his intentions regarding David Jones since the Sydney-based department store disclosed Lew held a 0.65 percent stake on May 30.

The shares were picked up at an average price of A$3.95, according to calculations. David Jones gained 0.5 percent to A$3.90 as of the market close in Sydney, below the A$4 offer from Woolworths.

Woolworths had noted Lew’s shareholding, the company said yesterday in a statement. “We believe our offer remains very compelling for David Jones’ shareholders,” it said. Woolworths Holdings is not related to Woolworths Limited, the supermarket chain that is Australia’s biggest retailer.

“If he has some views we would be delighted to hear them,” Simon Mawhinney, a portfolio manager at Allan Gray Australia, said from Sydney. “Maybe he’s just buying at A$3.88 so he can sell for A$4? That’s quite a reasonable thing to do.”

Lauren Thompson, a spokeswoman for Lew, declined to comment on his investment.

Several major investors have cut their stakes in the company ahead of the planned shareholder meeting.

Allan Gray had recently “significantly reduced” its holdings by selling in the region of A$3.95, Mawhinney said. It was not worth holding out for the A$4 sale price given deal costs, the length of time before cashing out, and the risk of a deal failing, he said.

The company was David Jones’ sixth-largest shareholder with 4.99 percent of the company as of February 21, according to data.

Ausbil Dexia, the fifth-largest shareholder with a 5.1 percent stake as of September 30, also sold out in recent weeks for the same reason, chief executive Paul Xiradis said.

“There’s a game being played” by Lew, Xiradis said. “I’m sure it’s to the benefit of himself.”

Premier Investments, the fashion and stationery group that counts Lew as chairman and 42 percent shareholder, had A$222m of net cash at the end of January, according to data.

“If all of a sudden he puts Premier in the game, there’s your 25 percent,” Lucas of IG said, noting that the current stake was held via Lew’s personal associates. “The issue is judging what Solomon Lew is going to do. Only he knows that.” – Bloomberg

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