The 17-year stand-off between Woolworths and Australian billionaire Solomon Lew has finally come to an end after he agreed to sell his stake in Country Road to the retailer.
On Friday retail analysts labelled the outcome as a “win-win” situation for both parties.
Woolworths had offered A$17 (R168) a share for Lew’s 11.8 percent stake in the group, which he has held since 1997. Media reports suggested that Lew would bank about $209 million (R2.2 billion) from the deal.
By the end of Friday, Woolworths said it had an interest in 99.84 percent of Country Road as a result of acceptances received for its takeover offer. This gave it the right to force minority shareholders to sell their remaining stakes.
In an earlier statement on Friday, Woolworths said the Australian Foreign Investment Review Board had approved its offer, which therefore became unconditional. Once it held over 90 percent, it would proceed with the compulsory acquisition of all outstanding shares by today. It said shareholders who did not accept the offer before it closed on August 11 would be subject to compulsory acquisition and would be not be paid until at least September.
Equity analyst Jean Pierre Verster at 36One Asset Management said it was a win-win outcome for Woolworths and Lew. “Both parties will walk away with something in hand.” He said Woolworths would soon own all of Country Road.
Woolworths previously held 87.9 percent but this rose to 99.84 percent after Lew accepted the buy-out offer.
Verster said the 90 percent threshold that allowed Woolworths to force remaining minority shareholders to sell their shares had been crossed.
Although Lew had made a significant gain from holding onto his shares, it should be remembered that he held out for almost 15 years, he added.
Woolworths has also bought Australian department store David Jones for R22.3bn.
Chief executive Ian Moir said: “The full alignment of Country Road’s ownership structure with Woolworths will deliver major benefits and opportunities for our shareholders, our people, and our customers. Together with the acquisition of David Jones, it greatly enhances our unique platform for growth and expansion in the southern hemisphere as a leading retailer of scale and quality.”
Verster said: “Lew got a good price for his stake, which he has held on to for more than a decade now. But the fourfold increase in the past year is not a true reflection of the return he has earned. The Country Road share price had flatlined for about 15 years, it only jumped in the last year.”
He believed that Lew did not make a quick buck as he had held the Country Road stock for such a long time, but he did earn a reasonable return.
Moir had previously said that shareholders should take advantage of the value that had been created in Country Road since Woolworths took control 15 years ago. “Over this period, 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.”
On the other hand, Verster said that as the almost 100 percent owner of Country Road and, probably, of David Jones, Woolworths would be able to grow the business.
“Because they will now have full ownership of the businesses, they can combine both companies and be able to cut costs without worrying about minority shareholders in either company.”
Independent retail analyst Syd Vianello previously said that even though strong competition from other global retailers operating in Australia awaited Woolworths, the retailer would benefit from its economies of scale created through the purchase of both David Jones and Country Road.
Woolworths fell 1 percent to close at R82.91 on Friday.