Solomon Lew has Myer within his reach,
Whatever is the solution to the challenges of Australia’s once premier department store group Myer, shareholders have now very definitely decided it is not billionaire Solomon Lew.
If ever there was going to be a time when “events” were going to help tip control into his hands, surely it had to be the turmoil and straight-out financial pain for retail from the last two Covid-wracked years.
Yet at the AGM during the week, he received almost zero support from other shareholders to unseat the board; indeed, he mustered significantly less support than he was able to get pre-Covid in 2018 when he came closest to toppling the incumbents.
At the latest AGM, votes against the board ran around 35-36 per cent. Back in 2018 Lew was able to get 43 per cent against the election of one director.
Interestingly, the actual vote to spill the board – Lew is able to get the “no” vote against the remuneration report above the 25 per cent trigger point – was almost exactly the same at both AGMs.
In 2018, the vote to spill was 36 per cent; this year it was 37 per cent.
Those percentages, though, misleadingly overstate the support Lew gets, as less than half the Myer shares on issue were voted this year.
Lew, who has a 16 per cent stake in Myer, was deploying more than 30 per cent of the votes actually being cast.
This meant that barely
2-3 per cent of all the Myer shares on issue joined in voting with him.
But this does also tell us that he is tantalisingly close to seizing control – if of course he sincerely wanted it.
He would really only need to buy another 10 per cent of the Myer capital – maybe 15 per cent tops – and his then 25-30 per cent shareholding would most likely give him 50 per cent-plus of the votes at an AGM.
Now while it wouldn’t
exactly be petty cash for a billionaire like Lew – another 10 per cent might cost him $50-60 million, 15 per cent closer to $100m – if he really, sincerely, wanted Myer AND really, sincerely, believed he could make it more successful and boost its share price, betting maybe 10 per cent of his net worth would seem a good punt.
He could go straight to 20 per cent by paying anything he liked to anyone.
After that he would have to make a formal takeover offer or be limited to buying 3 per cent every six months.
So you can see he could get to 26 per cent in a single year and to 32 per cent in two years. IF he sincerely wanted Myer and was prepared to spend the money.
Indeed, if he’d started back in the mid-2010s, he would have been inside the Myer boardroom and sitting at the head of the table long since.
He would also have had an even more stressed 2020, given all his other retail businesses.
Although, as it turned out, they all sailed through Covid brilliantly – with a “little” help from Josh Frydenberg’s JobKeeper and, somewhat more involuntarily, also his landlords.
As indeed, did Myer.
JobKeeper was critical to maintaining cash flows through all the closures, especially in hometown Melbourne; and even more importantly keeping staff connected to the business: the absolute core point of it all.
While I doubt that Myer chairman JoAnne Stephenson and CEO John King would quite see it this way, the brutal lockdowns might actually have been the making of Myer’s future, by doubling its online business.
In 2019 Myer’s online sales totalled $262m and comprised just 10 per cent of total sales.
Both those numbers doubled. This year online sales were $540m and 20 per cent of the total.
Provided these numbers can be broadly sustained after Covid, the growth is very significant.
First, online sales would now be big enough to matter in the overall group scheme of things.
Online sales growth could actually deliver overall sales growth.
Secondly, a $500m business would have critical scale, on both the costs side and the revenue side.
It also plays out into operational efficiencies and dynamics across the group.
Now equally, ironically, the
Myer of 2022 might actually give Lew more confidence that the risk-reward ratio of spending $100m to seize control has actually swung in his favour compared to back in 2018.
And, as I say, he could still do it quickly, within a year.
But, if he did, would he also be like the dog which caught the car?
That’s “catching it” the second time, after seizing control of the giant Coles Myer group back in the 1990s, from first entering the Myer register in the 1970s.
But now not really knowing, having “caught it”, what to do with it.