Anchorage Capital eyeing cut-price purchase of David Jones for $200m

DataRoom revealed in July last year that plans were afoot by Woolworths South Africa to sell David Jones. Picture: Britta Campion

Private equity firm Anchorage Capital Partners is planning to outlay about $200m for a potential purchase of David Jones as it carries out exclusive due diligence on the business, say sources.

It is a far cry from the $2.1bn that David Jones was purchased for in 2014 by Woolworths Holdings South Africa that has since made major writedowns on its investment.

David Jones owns its Melbourne store on Bourke Street, which a year ago was estimated to be worth about $250m alone, so should a deal happen around $200m, as suggested, it would value the operating department store business at less than zero.

DataRoom revealed in July last year that plans were afoot by Woolworths South Africa to sell David Jones – and first reported in May that private equity firm Anchorage Capital Partners was a suitor after Allegro Funds fell away as a buyer.

A revised sale process has since been under way through Goldman Sachs after private equity firms were initially allowed into a data room to conduct due diligence.

When Allegro looked earlier this year, it initially offered $400m before slashing its offer by about $200m after conducting due diligence, say sources.

The big challenge for Anchorage will be tackling the company’s 11-year retail leases.

Apparently the private equity firm has a plan to deal with such matters.

Yet the big question will be if it takes the same approach that Allegro Funds did with Harris Scarfe and places the business into voluntary administration which will automatically breaks the leasing agreements or if it comes to an arrangement with the landlords.

David Jones operates from more than 40 locations Australia and dealing with the leases has always been the challenge for any buyer.

In 2020, David Jones reaped about $510m from the sale of its flagship Castlereagh Street property in Sydney to Charter Hall, relieving pressure on the department store chain that had been struggling with the structural change towards online shopping that was exacerbated by the pandemic.