The Myer and David Jones department stores sit side by side in Melbourne's central business district, Australia, on Monday, Feb. 24, 2014. Photographer: Carla Gottgens/Bloomberg *** Local Caption *** XXXXX

Johannesburg - Woolworths shareholders have given the fashion and food retailer the go-ahead for its acquisition of Australian department store David Jones for R23 billion.

In the meeting yesterday, the acquisition and matters relating to the proposed rights offer were approved by the majority of shareholders.

Woolworths said the deal would allow the group to have enough scale to drive significant efficiencies and economies through enhanced global sourcing and the ability to leverage common seasonality and fashion trends.

The combination of the two companies would comprise 1 151 stores across 16 countries and a tangible asset base of approximately R21.4bn, among other benefits, the group said previously.

Chief executive Ian Moir said the shareholders had given Woolworths their full support and had displayed full understanding of the deal. “The meeting was excellent, we are very pleased with the outcome. We got over 99 percent votes, which is an outstanding result,” he said.

Last month, Woolworths gave a detailed funding plan for the acquisition, stating that about R10bn would come from cash or term facilities, R4bn would be achieved through an Australian bridging facility and the balance – amounting to R9.4bn – would come from equity bridge funding.

Moir added that there was a good understanding of how the deal would be funded.

“There were a number of resolutions that were put to the board today [yesterday] in relation to the funding and again they received a good response in the order of 99 percent.

“We have done a lot of work over the last six weeks talking to our shareholders, getting them to understand the deal rationale,” he explained.

Moir said two major steps needed to be completed before the deal could be finalised: the voting by David Jones shareholders at the end of the month and the deal’s final approval from the Australian court.

Under the proposal, David Jones shareholders would receive A$4 (R40) a share, a price Moir described as “very fair”.

“Subsequent to that we would issue share capital in September. A rights issue we will undertake in September and the proceeds of that… will be used to pay away the bridging loan that we have taken to get us between now and the issuing of the share capital.”

He added that some of the rights offer capital would come from the shareholders.

Moir said the deal was transformational for Woolworths and would allow the retailer to acquire real scale across the southern hemisphere. “It is going to give us economies of scale and allow us to get more fashionable goods at much better prices, both in Australia and in South Africa. It is exciting for the shareholders, and… our customers,” he said.

Responding to analysts’ warnings about Woolworths not making the cut in the Australian market, Moir said it had close to 20 years of experience in the market.

“We already have a very successful business through Witchery and Mimco in that market. We’ve… also a good record of acquisition integration in our existing business,” he said.

Once the deal was finalised, Woolworths would take a number of its local brands into David Jones, such as RE, Studio W and JT One. “We think the customers will react very positively to some of these brands,” Moir said.

Woolworths shares gained 0.9 percent to close at R78.59. - Business Report