Solomon Lew stands to make more than $200 million from deal involving David Jones, Woolworths Holdings and Country Road

ONE man stands to gain $200 million from a ‘smart play’ involving three of Australia’s biggest companies. Here’s how he pulled the whole thing off.

IT’S perhaps the smartest stockmarket play we’ve seen this year.

Retail giant Solomon Lew — one of the richest men in Australia and a former chairman of the board for Coles — could make more than $200 million by standing in the way of the $2.2 billion takeover of David Jones by South African retailer Woolworths.

The play has been dubbed “Lew’s Coup” by one market analyst, in which the clothing industry veteran appears to have bought up nearly 10 per cent of David Jones shares, in order to earn a healthy price for his interest in Country Road. Crafty, right?

South African retailer Woolworths owns a controlling stake in Country Road. Pictured, Isabel Lucas for Country Road.

South Africa’s Woolworths Holdings is the target of Mr Lew’s high stakes game. The company is the controlling shareholder in another retailer, Country Road, and the one bidding $2.2 billion for control of David Jones.

However, Mr Lew recently spent $209 million building up a 9.89 per cent stake in David Jones, enough to destabilise and potentially block Woolworths’ department store chain takeover.

Analysts believed Mr Lew was seeking a generous offer from Woolworths to end their often rocky association with Country Road, which began 17 years ago when Mr Lew bought into the retailer to stop Woolworths taking full control.

Analysts think Mr Lew got leverage out of his David Jones stake in order to buy Country Road.

That offer came on Tuesday, with Woolworths willing to pay a generous $17 for each remaining Country Road share.

That stands to net Mr Lew $209 million for his 11.9 per cent stake — well above its most recent market value of $172 million, and the $41.5 million it was worth just seven months ago.

Mr Lew is yet to indicate whether he will accept the offer.

But in a rare move, Woolworths will only pay out Mr Lew for full control of Country Road if its David Jones takeover gets the green light from the department store’s shareholders.

“It’s unusual to see a condition like that,” CMC Markets chief analyst Michael McCarthy said.

“That points to the fact that Mr Lew got leverage out of his DJs stake to resolve the Country Road situation.

“This has been some very smart play.” David Jones shareholders are due to vote on the Woolworths takeover on July 14, although that could be delayed for a second time if there are complications with the Country Road deal.

Mr Lew now stands to earn $200 million for his country road stake.

Concerns have been raised about so-called “collateral benefits” regulations, which prevent inducements being offered to some shareholders in a takeover deal, but not others.

But Mr McCarthy believes the deals have been carefully crafted to avoid legal challenges.

David Jones shares gained 15 cents, or four per cent, to $3.94, indicating investors now expect its takeover to go ahead, Mr McCarthy said.

Country Road will be removed from the share market if Woolworths take complete ownership.

SOLOMON LEW’S DJS PLAY PAYS OFF

• Solomon Lew stands to earn $209m for his Country Road stake

• He could make $4m on his newly acquired David Jones stake

• Woolworths offering $37m above market value for Country Road’s remaining shares

• David Jones shareholders now more likely to receive $2.2b from Woolworths’ takeover