The David Jones board has given the green light to a $2.15 billion takeover offer from Woolworths.
UPDATE: Myer will advise David Jones today of the withdrawal of its proposed merger of equals.
The board confirmed today that it has entered into a Scheme Implementation Deed (SID).
It is proposed under the SID that South African retail giant Woolworths will acquire all of the David Jones shares for AU$4.00 cash per share.
The cash payment of AU$4.00 per share represents:
- a 25.4 per cent premium to the closing price of David Jones shares on April 8, 2014;
- a 39.4 per cent premium to the price of David Jones shares on January 30, 2014 (being the last closing price prior to the Myer proposal becoming public);
- a 26.8 per cent premium to the three month volume weighted average price of David Jones shares;
- a multiple of 20.8x the reported FY13 EPS of 19.2 cents per share and 23.8x the estimated FY14 EPS of 16.8 cents per share based on consensus broker estimates1; and
- an implied market capitalisation of AU$2,149 million.
David Jones will appoint an independent expert to prepare a report on whether the proposal is fair and reasonable and in the best interests of David Jones shareholders.
The independent expert’s report will be included in the Scheme Booklet which is expected to be distributed to shareholders in late May 2014.
It is anticipated that Woolworths shareholders will have the opportunity to vote on the proposed acquisition and in relation to the contemplated post-transaction equity raising at a meeting to be held in South Africa in mid-June 2014.
It is expected that David Jones shareholders will have the opportunity to vote on the proposal at a scheme meeting to be held in late June 2014.
Subject to the conditions of the scheme being satisfied, the scheme is expected to be implemented in mid-July 2014.
Commenting on the deal, David Jones chairman Gordon Cairns said it is a “compelling proposal”.
“David Jones is an iconic brand with a long and justifiably proud history. This is a compelling proposal which represents a significant premium to not only our intrinsic value but also to broker valuations and to recent share prices. It represents a substantial earnings multiple.”
“In reaching our conclusion that the proposal is in the best interests of shareholders, customers and employees, the Board has considered a number of alternatives, including standalone value creation opportunities; realising the value of the freehold properties owned by David Jones; or pursuing a merger with Myer in accordance with its proposed terms.
"Upon assessing the alternatives before it, the board has unanimously concluded that the Woolworths offer is a compelling option which realises value for our shareholders.”
David Jones managing director and CEO Paul Zahra said the proposal is a step in the right direction for the continued growth of David Jones.
“I am pleased that the Woolworths proposal recognises the attractive outlook for David Jones including the benefits that have and will flow from the continued implementation of our Future Strategic Direction Plan. The Woolworths proposal is an endorsement of our Future Strategic Direction Plan and our management team.”
Woolworths’s CEO Ian Moir said the retail group will work with the David Jones team to deliver the strategies already set in place.
“We believe that David Jones is a truly iconic Australian retail business. Woolworths is a very similar business, closely aligned in terms of our target markets and our values. The combination will create a leading southern hemisphere retailer with meaningful scale, able to leverage common fashion seasonality with enhanced sourcing capability.
“Woolworths will bring extra capability, financial strength and significant scale to accelerate these strategies and offer a greatly enhanced value proposition, delivering on-trend product within the most exciting and innovative shopping experience in the market.”