76 replies to this topic

[Ninja]

From the 2 articles below, clear that battle lines have been drawn... Stupid thing was for woolies to pitch a 25% premium on DJS at the onset. Now will they cough up more for Mr. Lew or will they cough up to buy his Country Road stake.... It seem one way or another this will be more costly for Woolies shareholders

Does anyone know if it's still trading under a cautionary??

Edited by Ninja, 22 June 2014 - 07:17 PM.

[Ninja]

Solomon Lew suspected of spoiler stake in David Jones
June 23, 2014

Solomon Lew needs just 12.5 per cent of DJs shares to block the bid.
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By ELI GREENBLAT
Large investors in takeover target David Jones have been tapped on the shoulder to lend out their securities to an unknown borrower, heightening speculation rag-trader billionaire Solomon Lew is stepping up efforts to build a blocking stake to derail South Africa's Woolworths $2.2 billion takeover of the department store operator.

Speculation surrounding Mr Lew's intentions keeps on expanding, with the suggestion that he wants to spoil the takeover bid from South Africa's Woolworths to pave the way for him to resurrect last year's proposal for a nil-premium merger between David Jones and arch-rival Myer.

Mr Lew is a former chairman of Coles Myer and was one of the retail conglomerate's largest shareholders through his Premier Investments holding before eventually the company was split, with Wesfarmers buying Coles and Myer taken by private equity.

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Premier's Solomon Lew. Photo: Bloomberg
He had built up his 6 per cent stake by parlaying an original holding in Myer into a stake in the combined Coles Myer business when it was fused in 1986.

A proposal last year from Myer to merge with David Jones was at first rebuffed by the upmarket department store, and then eventually blown out of the water by Woolworths' $2.2 billion offer in April, which came at a sizeable premium, especially compared with Myer's nil-premium deal.

However, the true intentions of Mr Lew remain shrouded in mystery, with the leading suggestion still that he wants to use the 10 per cent holding in David Jones as leverage to get Woolworths to buy out his $160 million minority stake in fashion chain Country Road.

There was heavy trading in the securities lending sector of the David Jones market last Thursday, with market participants also reporting that institutional shareholders had been approached on Friday to offer up some stock. The identity of the buyer looking to borrow the stock in David Jones remains unknown, although most believe it was Mr Lew.

Last week 10 per cent of David Jones' shares were on loan through securities lending arrangements, with that dropping to 5 per cent by Friday.

However, as it takes three days under the ASX systems to report changes in ownership, the true lending position of David Jones' issued capital may be revealed on Monday or Tuesday.

An initial dip in lending could also signal that the borrower had been able to fill their requirements by deciding to buy shares on the market.

These movements come as a vote on the Woolworths takeover has been extended, and is now 22 days away.

David Jones' share register has a large number of small investors - as opposed to a high proportion of institutional investors - and companies with such a strong lean to mum-and-dad investors typically have low turnouts at shareholder meetings.

David Jones needs 50 per cent of shareholders holding 75 per cent of the shares voted to succeed in getting the takeover passed.

At David Jones' annual meeting last year only 50 per cent voted, meaning Mr Lew could block the bid with as low as 12.5 per cent voting ''no''

[Ninja]

Woolworths delays David Jones vote
by Andiswa Maqutu and Ron Derby, 20 June 2014, 06:24

Picture: REUTERS
There is talk that Solomon Lew may have another 5% holding in David Jones via derivatives, taking his ownership to 15%

WOOLWORTHS’ bid to become one of the southern hemisphere’s largest retailers by buying Australian department store chain David Jones was dealt a blow on Thursday when a shareholder vote to approve the deal was delayed by two weeks due to the emergence of billionaire investor Solomon Lew as one of the company’s major shareholders.

The vote on the R23.3bn deal had to be postponed to allow "sufficient" time for the David Jones board, which supports the offer, to assess the implications for shareholders, the company said in a statement to Australia’s bourse.

Mr Lew built up his stake in David Jones to 9.89% between May 9 and June 16 this year, a month after Woolworths first announced its bid to acquire the struggling chain of department stores. There was talk that Mr Lew may have another 5% holding through derivatives, taking his ownership to 15%, said Noah Capital Markets consumer analyst Roger Tejwani.

"If he does have 15%, he could be a significant shareholder because of the fairly poor turnout at voting meetings," he said.

Woolworths needs a minimum of 90% of David Jones stock in order to force out minorities and de-list the company.

Mr Lew has been a thorn in the side of Woolworths in Australia for years. He has successfully blocked the Cape Town-based retailer from gaining full control of its Country Road unit in that country since 1997. If the billionaire investor succeeds in keeping David Jones listed, it would leave Woolworths as owner of two separately listed entities, the other being Country Road.

Woolworths would not comment on the postponement of the shareholder meeting, referring Business Day to its most recent Stock Exchange News Service statement on the shareholder approval it received for the deal.

Despite speculation about potentially blocking a de-listing, Mr Lew’s exact intention with his stake in David Jones is unclear. Some analysts have suggested that he may use it as leverage to ensure the merged company does not increase the proportion of private label goods in stores as he is a supplier.

One of Woolworths’ stated plans to help boost profit at David Jones is to increase sales of in-house clothing brands and cut supply-chain costs. Profits at the Australian retailer have declined over the past three years; the business is riddled with inefficiencies in what is a slow growth market.

Another possible angle to Mr Lew’s interest was that the former board member of the Reserve Bank of Australia might want Woolworths to raise its offer price for the Australian retailer, BPI Capital Africa analyst Luis Colaco said. "The main risk to Woolworths’ shareholders is if the company ends up having to increase its offer," he said.

"If they pay a higher multiple for the same business, it will impact the value of its (Woolworths) shares," Mr Colaco said.

The market was concerned that Woolworths’ A$4 offer for David Jones was steep, with the share falling 7.6% on April 9, the day the deal was announced.

However, since then, Woolworths shares have gained 15%, while the Australian-listed shares of David Jones have been a marginal 0.3% weaker at A$3.90.

After surprising the market with its decision to pull out of its Nigerian operations, Woolworths CEO Ian Moir focused on the Australian opportunity. Should it be successfully concluded, the company would become one of the world’s top 10 department store chains with 1,151 stores across 16 countries.

Its size would enable the company to better compete with the world’s leading retailers such as Inditex, which owns Zara. If the deal did not transpire, it would not be much of a concern for Woolworths shareholders, Mr Colaco said. With its food business and its exposure to emerging markets, the company was still in a favourable position, he said.

Edited by Ninja, 22 June 2014 - 06:57 PM.

[Procrastinator]

I Reckon Mr Lew will sink this deal, he supplies David Jones with product, he knows that if the woolies deal goes through they will bomb him as a supplier given the acrimonious history that he has with Country Road story.
(He is no doubt incredibly stubborn and shrewd as he has had a wrangle with Woolies going back some 15 years re. Country Road)
Woolies will have to swallow all the due diligence and legal costs.
Seems crazy that Moir didn't see this one coming given the history.
WHL short on the cards maybe?

[ykhan]

Hi Guys

 

Just been reading all about the DJ deal and Lew in the mix to get his share...the massive move in country road this year and how it all affects the DJ deal. Who has a better view or opinion on this? I think that even if we pay a little more for it, itll allow them to loose a thorn in woolies side and at the same time set up better opportunity for international competition!

[Joebanker]

Thanks for that bit of info

[yusufm]

Anyone know of when the rights issue comes in?
It was supposed to be the last week of May.

And is it as simple as making a profit if one is in a short position when the rights issue comes into play?

 

No your account will be decreased by the value of the rights that would've been issued had you received them, or the number of cfds that you own will be decreased. Usually the latter.

 

Also I'm not sure but it does not appear as if the rights offer has been finalised as yet. (If it has can someone point me in the direction of the article?).

 

" The Equity Bridge Funding is expected to be repaid out of the proceeds of an

 underwritten renounceable rights offer proposed to be undertaken by the
 Company (the ?Proposed Rights Offer?). WHL intends to commence the
 Proposed Rights Offer after the Proposed Acquisition has been completed. The
 Company will determine, in consultation with the Funders, the detailed terms of
 the Proposed Rights Offer, including the amount of financing to be raised, the
 offer price per share and number of shares to be issued taking into consideration
 market conditions at such time, which details once finalised will be released on
 SENS and will be set out in the Proposed Rights Offer circular to be posted to
 WHL Shareholders in due course."

 

-From SENS on the 16 May 2014

Edited by yusufm1, 05 June 2014 - 12:04 PM.

[Joebanker]

Anyone know of when the rights issue comes in?
It was supposed to be the last week of May.

And is it as simple as making a profit if one is in a short position when the rights issue comes into play?

[M e r l i n]

I decided to dispose of my Woolies shares basically for two reasons: (13.000 shares)

 

1. I am retired and do like to receive good (hopefully increasing) dividends every 6 months and I fear that Woolies may be needing the cash they previously paid out to shareholders to ensure that the deal in Australia is successful?

 

2. If we are optimistic the deal may well only bear fruit in 5 to ten years time so while it may be a good long term investment for younger guys it doesnt fit in with my strategy.

 

Woolies has been a great investment for me and I wish those that stay with the investment all the best in the future but now is the time for me to love you and leave you.

 

Well Grumpy Old Man, I believe you are not so grumpy having a million in your pocket right now, Woolworth RSI generated a sell signal on May 15th, so your timing for bailing was spot on - congratulations, well done.

Edited by M e r l i n, 20 May 2014 - 09:16 PM.

[grumpy old man]

I decided to dispose of my Woolies shares basically for two reasons: (13.000 shares)

 

1. I am retired and do like to receive good (hopefully increasing) dividends every 6 months and I fear that Woolies may be needing the cash they previously paid out to shareholders to ensure that the deal in Australia is successful?

 

2. If we are optimistic the deal may well only bear fruit in 5 to ten years time so while it may be a good long term investment for younger guys it doesnt fit in with my strategy.

 

Woolies has been a great investment for me and I wish those that stay with the investment all the best in the future but now is the time for me to love you and leave you.

 

[Zero Hedge]

That's true but they've also taken share from the rest of the market. To some extent this is easy since in its food category Woolies has little to no competition. It's an aspirational place to shop so as people can afford it they buy there. The general rise of the black middle class has been a big factor here and that macro trend is still far from done so in SA there is much growth in the tank, despite the interest rate and despite the lower LSMs being under pressure. Remember that the better off you are the less subject to rate rises you are...though not entirely immune. A very sharp spike in rates will probably hurt Woolies bad as the bottom of their consumer base drops back into SHP and PNP etc.As for clothing, this has been where management has really excelled over the past few years. Today's range is a far cry from the dour shite they were selling a few years ago. Again they have it spot on here in that they have aligned their clothing brands to their general consumers, mainly wannabe trendy aspirational women. Can they do it in Oz? I've no idea...I just hope Moir understands the market well enough to do it.

Think he understands market...spent 12 years in Australia and CEO of CR...but time will tell.

[gamma]

I back management... Yes!! However the past 5years was cyclical, low interest, rate consumer demand driven phase.

So in good times things normally go well... Like my 1.3 corolla going downhill, only realise what a donkey it is when when the uphill comes.

Management did well on the downhill, will have to see how the challenge unfolds.

For now that resistance around R80 - R82 still holding

 

That's true but they've also taken share from the rest of the market. To some extent this is easy since in its food category Woolies has little to no competition. It's an aspirational place to shop so as people can afford it they buy there. The general rise of the black middle class has been a big factor here and that macro trend is still far from done so in SA there is much growth in the tank, despite the interest rate and despite the lower LSMs being under pressure. Remember that the better off you are the less subject to rate rises you are...though not entirely immune. A very sharp spike in rates will probably hurt Woolies bad as the bottom of their consumer base drops back into SHP and PNP etc.As for clothing, this has been where management has really excelled over the past few years. Today's range is a far cry from the dour shite they were selling a few years ago. Again they have it spot on here in that they have aligned their clothing brands to their general consumers, mainly wannabe trendy aspirational women. Can they do it in Oz? I've no idea...I just hope Moir understands the market well enough to do it.

[Ninja]

I back management... Yes!! However the past 5years was cyclical, low interest, rate consumer demand driven phase.

So in good times things normally go well... Like my 1.3 corolla going downhill, only realise what a donkey it is when when the uphill comes.

Management did well on the downhill, will have to see how the challenge unfolds.

For now that resistance around R80 - R82 still holding

[ThatBlackGuy]

Any views on Fridays announcement and lifting of cautionary..

It seems the R23b will be financed as ff:
R10b cash
R4b loan from Ausie bank
R9b rights issue

In effect diluting NAV by 6.8%, or earnings by 35%

 

The financing is less of an issue in my view. Doesn't seem like the balance sheet will be too stretched, with almost half the cash coming from fresh equity.

 

How those "synergies" are to be realised is what I'd be focused on. Do you back management?

[Ninja]

Any views on Fridays announcement and lifting of cautionary..

It seems the R23b will be financed as ff:
R10b cash
R4b loan from Ausie bank
R9b rights issue

In effect diluting NAV by 6.8%, or earnings by 35%

[UpAnDdOwN]

Problem seems to be the size of the rights issue that they effect to generate the capital required for the deal. Uncertainty is making everyone worried.

[Procrastinator]

David Jones (DSJ on the ASX) - Largest department store in Australia.
 
Expensive deal in my opinion ($2bn). Paying a P/E of 22.5x for the business.
 
CEO mentioned that they expect synergies of  $130m a year. If you assume they paid away half those synergies at 18x, then they are acquiring the current business at 12x... which makes it look a bit more reasonable.
 
Since this deal represents 40% of Woolworths current market cap, one is backing management heavily as everything hinges on their ability to deliver those synergies. 
 
Wonder how the market will see it, but I'd be slightly cautious.
 
That said, watch the share price run 20% over the next two days.

Looks like the market doesn't like this deal, 8% hit in one day.
Did they have a sens out about this possible acquisition ?

[gamma]

I has de-ja-vu feeling ala Tigerbrands acquisition of Dangote couple years back.

 

No doubt management will pull it off me thinks it may just take a while.

It's a big chunk to digest at A$2bn....lots of chewing to be done for the next 18mths.

Cheers.

 

I'm backing them because they have some experience in the Ozzie market and furthermore they've proven their ability to deliver. But time will tell for sure. Big Deal, Big Risk, Big Reward.

[soutie]

I has de-ja-vu feeling ala Tigerbrands acquisition of Dangote couple years back.

 

No doubt management will pull it off me thinks it may just take a while.

It's a big chunk to digest at A$2bn....lots of chewing to be done for the next 18mths.

Cheers.

[gamma]

Just added a big chunk to my long term holdings at 6890