Talk of Myer-David Jones merger propels investors to boost shares
MYER’S share price surged on Friday as speculation spread that its long-time rival, David Jones, was crunching numbers for a possible takeover offer.
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MYER shares have surged amid renewed speculation David Jones is weighing up a takeover offer for its long-time arch enemy.
Denials by David Jones on Friday failed to convince investors a tie-up between the two department store chains was not a possibility, with Myer’s share price surging more than 12 per cent during trade.
CHAIRMAN VOWS TO FIX DEPARTMENT STORE CHAIN
VALUE TO TUMBLE FROM DAVID JONES
The latest bout of speculation South African retail titan Woolworths Holdings — owner of David Jones and the Country Road Group — was crunching the numbers came after Myer’s share price hit an all-time low on Thursday.
David Jones is in the middle of a major restructure that includes centralising operations at its new Melbourne headquarters, overhauling its Sydney flagship store and pouring $100 million into a new gourmet food offering.
Any takeover deal would also involve negotiations with Myer’s biggest shareholder, retail billionaire Solomon Lew.
David Jones moved rapidly to hose down speculation, saying in a statement that “these rumours have no basis”.
“We are not considering an acquisition of Myer and there have been no discussions regarding an acquisition with advisers or between the two companies,” it said.
But with the rumour reviving the concept Australia’s two venerable department store chains could become one, investors rallied around Myer.
After the early spike, Myer shares lost only some ground, closing 7.3 per cent higher — albeit off a low base — at 37c.
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 earlier this decade and leveraging it to achieve a bumper payday.
A Myer spokesman said the retailer had no comment to make on the latest 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 would also have more clout in trying to secure rent reductions or break leases with landlords — a key issue for Myer, which has warned it might need to close 19 stores.
Myer approached David Jones in 2013, proposing a “merger of equals”, but that was rejected by the David Jones board.
Former Myer chief Bernie Brookes has pointed out any merger was likely to 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,” he told Business Daily earlier this year. How the ACCC assessed the market that the chains operated in would be key, he 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 is going to be the key issue if that ever happens.”
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