230909 Woolworths in woodmead.photo by Simphiwe Mbokazi

Sydney - Australian regulators said Woolworths should provide an independent valuation of Country Road due to concerns investor Solomon Lew may benefit unfairly from selling Woolworths his stake in the Australian apparel retailer.

The Australian Securities and Investments Commission (ASIC) raised its concern about Woolworths' A$213 million ($201.5 million) offer to buy the billionaire investor's 11.88 percent stake in Country Road in a Federal Court application on Wednesday.

Lew, who has refused to sell his stake in Woolworths's Country Road since 1997, has amassed a holding of about 10 percent of Australian department store David Jones, raising speculation Woolworths offered to buy his Country Road stake at an inflated price to convince him to sell David Jones.

The ASIC court application does not necessarily kill Woolworths's $2 billion bid for David Jones, Australia's second-largest retailer, though it may add more delays in what has become an increasingly complex and personal saga.

David Jones has already postponed by two weeks its shareholder vote on the deal to give it time to consider the impact of the potential blocking stake that Lew quickly amassed over just one month.

Calling for an independent valuation of Country Road shares, which in January were worth a third the A$17 a share that Woolworths is offering Lew, ASIC said it is “concerned that the consideration to be received by Mr Lew under the (Country Road) takeover offer offends the equality of opportunity principle enshrined in... the Corporations Act”.

“Despite having 17 years to do so, Woolworths did not decide to make (the Country Road) takeover offer until Mr Lew acquired a material stake in David Jones,” the regulator said in its court submission, obtained by Reuters.

“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.”

Woolworths should provide a report which includes 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 any Relevant Benefits receivable by Mr Lew.”

Spokespeople for David Jones and Lew were not immediately available for comment.

The regulator said its next course of action will be influenced by any further disclosures given by Woolworths to other David Jones shareholders and an explanation of the relationship between Woolworths's bids for Country Road and David Jones. - Reuters