Woolies ready to rule the south
IAN Moir headed out with the small team that managed Woolworths’s takeover of David Jones to dinner in Cape Town on Thursday to celebrate the deal that will transform it into the second-biggest retailer in the southern hemisphere.
There’s much to toast, but the team had to hit the ground running on Friday. The deal will make or break Woolworths executives, and determine the group’s place in retail history.
Woolworths got the green light on Thursday from Australian authorities to complete the transaction after a difficult few weeks during which the deal at times hung in the balance, though Moir says he was always confident, “probably inappropriately so at times”.
Moir said: “I think if you go through these deals in a half-hearted way and allow yourself any lack of confidence or doubt in your mind, then you’re not going to get there . . . we did a lot of work, and the board was extremely tough on us through the process.”
This meant overseeing the rationale for the deal, synergies and value that could be extracted, and the funding.
The Federal Court gave the go-ahead, despite opposition from the Australian Securities and Investment Commission, after the judge took into account the overwhelming shareholder support for the deal following Monday’s vote by David Jones shareholders.
How does Moir feel about possibly the biggest day in the company’s history? “Very happy — this feels like a long process, but for a deal this size it’s probably been quite a short process. We’ve managed to get a lot done in a very short space of time — it’s been at times arduous and at all times complex. The court ruling means the deal is done, the money’s in the bank, and by August 1 we will own that business.”
The biggest obstacle came from Solomon Lew, the longtime largest minority shareholder in Woolworths’s Country Road. Lew upped his stake in David Jones with clear tactical intent, but left the market speculating about his motivation. In the end, it was about maximising the value of his stake in Country Road, where he’d been a shareholder for 17 years.
Lew had had a few battles through his advisers with Moir, and tried to get him out of Country Road (where Moir had been CEO) when it was not doing well, but Moir has never met him.
“We were not taken by surprise” by Lew’s threat to the David Jones deal, Moir said. He said the timing was right for Lew to exit Country Road.
“We considered something might happen with him — we always viewed it as a possibility. Sol coming in and looking to get value. He’s clever and wily. The thing is, it was the right thing for us as well.”
What Woolies had not factored in was what the fair price for Country Road would be. Some analysts say Woolworths paid too much to buy out minorities in Country Road, but Moir says it was a fair price at A$17 a share, pointing to value that has been created through the addition of Witchery and Mimco and the synergies that could come from combining David Jones with Country Road.