Myer up on DJ rumour
Takeover talk denial fails to stop ailing store’s share surge
SHARES in Myer have surged amid renewed speculation David Jones is weighing up a takeover offer for its old and ailing enemy.
Vigorous denials by David Jones failed to convince investors a tie- up between the two department store chains was not a possibility with Myer’s share price surging by more than 12 per cent in intraday trade.
The latest bout of speculation that South African retail giant Woolworths Holdings, which owns David Jones and the Country Road Group, was crunching the numbers on a possible deal came as Myer’s share price hit an all- time low.
“These rumours have no basis,” David Jones said in a statement. “We are not considering an acquisition of Myer and there have been no discussions regarding an acquisition with advisers or between the two companies.”
David Jones is in the middle of a major restructure which includes centralising its local operations in a new Melbourne headquarters, overhauling its Sydney flagship store and pouring $ 100 million into a new gourmet food offer.
Any takeover deal would also involve negotiations with Myer’s biggest shareholder, retail billionaire Solomon Lew.
Mr Lew and Woolworths chief Ian Moir have previously locked horns, with the former grabbing a stake in David Jones when the South African retailer first started looking to take it over and leveraging it to achieve a bumper payday.
A Myer spokesman said they had no comment to make on the latest takeover speculation while sources close to the Lew camp said they did not expect any deal to eventuate.
A combined group would be able to find cost savings by combining head office functions and also have more clout in trying to get rent reductions or break leases with landlords – a key issue for Myer which has warned it may need to close 19 stores.
Myer approached David Jones in 2013 proposing a “merger of equals” but it was rejected by the David Jones board.
Former Myer chief Bernie Brookes has pointed out any merger between the two department store chains is likely to ultimately be decided by the competition regulator, not shareholders.
Mr Brookes was running Myer when it approached David Jones in 2013 – a proposal the Australian Competition and Consumer Commission said it would need to closely examine.
“Ultimately, whether it works and whether it ever happens is largely going to be controlled by the regulators,” Mr Brookes told Business Daily earlier this year.
How the Australian Competition and Consumer Commission assessed the market the two department store chains operated in would be key, Mr Brookes said.
“The question for the regulator is do you measure the market as a department store market, a discount department store and department store market or as an apparel market?” he said.
“If you determine it as the total apparel market including online then the percentage share is quite low.
“If you determine it as department stores only then it wouldn’t be permitted and I think that it is going to be the key issue if that ever happens.