David Jones deal approval excites Woolworths chiefComment on this story
For Woolworths all roads lead to Australia, where the South African company will tailor its growth plans to become the biggest retailer in the southern hemisphere.
Woolworths chief executive Ian Moir could not hide the excitement in his voice during a teleconference with journalists yesterday.
Even questions about the thorny issue of Solomon Lew, who almost threw the takeover of David Jones into turmoil by taking a potentially blocking stake weeks ahead of the vote at the Australian store, could not bring Moir’s thrilled tone down.
Yesterday the Federal Court of Australia approved the scheme of arrangement between David Jones and its shareholders in which Woolworths will acquire the department store chain. The decision came days after David Jones shareholders overwhelmingly approved the R21 billion takeover.
Lew, who owns 9.9 percent of David Jones, abstained from voting. He has managed to prevent Woolworths taking full control of its Country Road subsidiary in Australia since 1997.
Last month, Woolworths offered A$17 (R170) for each outstanding Country Road share. Lew paid about A$2 a share for his stake in 1997. Moir said minority shareholders should take advantage of the value that had been created by Woolworths in Country Road.
“Over this period of time Country Road went from an underperforming business to a well-performing business and is now close to reaching R1 billion a year in turnover… Now will be the time to take advantage of the value that has been created,” he said.
He went on to say it was likely that Lew would eventually take up the A$17 offer.
Moir said that the David Jones deal was about creating one of the largest southern hemisphere retailers, which would draw synergies from a single system and create economies of scale across the group, including in South Africa.
Asked how the deal would affect South African customers, Moir said they would benefit from lower costs of goods, “which will be passed down to them”. He added that this would allow Woolworths to continue to take market share in clothing retail from its domestic competitors.
“We will be able to create more product flow into our stores on a regular basis at much better prices,” he said.
Moir said Woolworths’s trading update for the 52 weeks to June 29 yesterday showed that the retailer had been taking market share in clothing on a three-, six- and 12-months basis.
“I think what this deal is going to do is to allow us to accelerate this over the next two years and take more serious share from our competitors in South Africa.”
Woolworths said group sales increased by 14.4 percent compared with the corresponding 52-week period of last year, which had 53 weeks. Clothing sales in South Africa grew by 10.6 percent on the same basis.
Sales in Australasia rose 20.3 percent in Australian dollar terms.
Moir said the group had no plans to list in Australia and would remain a proudly South African company.
It would, however, introduce some private brands into David Jones stores.
Other initiatives would include the introduction of an improved loyalty programme based on Woolworths’s existing scheme.
Woolworths had previously said the combination of both companies would comprise of 1 151 stores across 16 countries and a tangible asset base of approximately R21.4bn.