Johannesburg - Woolworths had been given more time to lobby David Jones shareholders to vote in its favour in the R21.5 billion bid for the Australian department store, analysts said yesterday.
The Federal Court of Australia granted David Jones shareholders a two-week extension to hold their shareholders meeting after it emerged that Australian billionaire Solomon Lew rapidly bought 53 million shares between May 9 and early this week. This pushed his shareholding from 0.65 percent to 9.9 percent.
The meeting, which was scheduled for June 30, could be pivotal for Woolworths, which needs about 75 percent of shareholder’s votes for the deal to go ahead. The court granted the postponement to mid-July to allow sufficient time for David Jones’ board to assess the implications associated with Lew holding 9.9 percent of the retailers’ shares.
Woolworths said yesterday that the postponement would not affect the David Jones board’s unanimous recommendation of its proposal to David Jones shareholders, in the absence of a superior proposal.
Lew also blocked Woolworths from taking control of Australian apparel store Country Road in 1997 through a stake of about 12 percent, which was held by his company, Australian Retail Investment.
Equity analyst Jean Pierre Verster at 36ONE Asset Management said speculation was rife that Lew could own more than 10 percent of David Jones shares. He said in addition to the confirmed 9.9 percent there was speculation that Lew owns a further 5 percent through Deutsche Bank.
“This could mean that he owns about 15 percent of David Jones. However, 25 percent of total shareholder votes need to be cast against the deal for it to fail,” he said.
Verster said Woolworths needed to ensure that at least 60 percent of all David Jones shareholders voted for the transaction, if one assumed Lew was the only shareholder who would vote against it.
He added that the two-week postponement of the meeting could mean two things, “either Woolworths wants more time to phone up shareholders and make sure that as many as possible fill in their voting forms, or Woolworths will use this time to engage Lew in negotiations.”
Verster added that other than owning about 15 percent of David Jones, Lew was a major shareholder in Country Road and that also through his retail interest he was a supplier to David Jones.
“Taking into account that part of Woolworths’ strategy is to sell certain of its own private label merchandise through David Jones stores, Lew might see this as a risk – that if he does not get involved or negotiate something with Woolworths this could significantly decrease the purchase of goods by David Jones from the companies that Lew has invested in as supplier.”
Verster said the postponement could also give Le w more time to buy more shares from other shareholders. “There could be another chapter to this story,” he added.
Chris Gilmour at Absa Investment said the 9.9 percent stake that Lew bought would not harm the deal.
“It could just be a thorn for Woolworths given what happened in the Country Road deal where Lew refused to sell his stake,” he said.
He said the 9.9 percent stake was not enough to block special resolutions, however, “it is enough to prevent Woolworths from completely buying-out David Jones”, he said.
Gilmour said although the extension period would not have any impact on the deal, it was concerning that no one knew what Lew was up to.
Woolworths shares inched up 0.57 percent to close at R78.24 yesterday.