David Jones moves closer to $125m sales rack

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

The sale of department store David Jones is heading closer to completion, and the thinking is the deal value could be closer to $125m. Sources say a sale to private equity firm Anchorage Capital Partners could be agreed as early as this week.

DataRoom understands the $125m-odd price excludes the real estate on Bourke St, Melbourne that David Jones owns. The real estate was earlier understood to be part of the sale and worth about $250m.

One view is that David Jones’ owner, Woolworths Holdings South Africa, will retain the site.

Anchorage has been in exclusive due diligence for a potential acquisition of David Jones in recent weeks after being in talks over an acquisition earlier this year.

Woolworths Holdings paid $2.1bn for the luxury department store chain in 2014, but has made major writedowns on its investment as department stores suffer globally from competition from online retailers.

DataRoom revealed in July last year that plans were afoot by Woolworths to sell David Jones – and first reported in May that private equity firm Anchorage 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, sources say.

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

David Jones operates from more than 40 locations in 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 St property in Sydney to Charter Hall, relieving pressure on the department store chain that had been struggling with the structural change towards online shopping, which was exacerbated by the pandemic.