An Indian private equity group is believed to be circling David Jones, as the Australian department store is said to be pressing ahead with the sale of its Sydney property.
While the identity of the suitor remains a mystery, Indian billionaire Mukesh Ambani has been acquisitive of late through his business empire, Reliance Retail and Reliance Jio, while Tata, one of India’s largest conglomerates, owns retail businesses.
Woolworths South Africa bought David Jones for $2.1bn in 2014, but the business has failed to fire for the company, with the department store suffering losses and major writedowns since.
It has been working with KordaMentha and UBS to find ways to reduce its debt, and has a sales process under way for its real estate with help from the Swiss bank.
Bidders for the David Jones properties in central Sydney and Melbourne were expected to be short-listed this week. However, it is now understood that the main interest is in the Sydney site, given the challenges for parties carrying out due diligence on the Melbourne property while the city has been locked down due to the coronavirus outbreak.
Buyers for the flagship Sydney store on Elizabeth Street have come forward with offers said to be about $400m-$500m.
The entire portfolio is expected to sell for about $700m.
However, the question is whether that will be enough to cover David Jones’ debts, said to be about $750m.
On a net debt basis across Woolworths South Africa’s Australian platform, which includes David Jones, sources close to the department store said the number was less than $300m. Among the groups understood to have shown interest are Charter Hall, Shaun Bonett’s Precision Group and Scentre.
The focus for buyers is expected to be on gaining a sustainable yield from the two flagship stores in Sydney and Melbourne.
The belief is that buyers would want David Jones to pay about 10 per cent of its revenue as rent, but analysts say the department store, which like most department stores globally in recent years has suffered from heavy losses, is more in position to pay about 2.5-5 per cent of its revenue as rent.
Yet some floors within the buildings can be redeveloped into offices, which could boost the returns for buyers.
David Jones has netted $120m for one of its central city Melbourne sites on 299 Bourke Street.he other premier retail trading site that is for sale is at 310 Bourke Street along with the Sydney site on Elizabeth St. In a better market, some believe David Jones would have achieved at least $800m for the buildings.
NAB weighs return to Scottish roots
The $1bn-plus sale process for the non-bank lender Scottish Pacific is yet to start in earnest, but there’s one party that has already been at least kicking the tyres.
Crown owner Blackstone fancied to snap up Star
There’s talk that the New York-based private equity firm is once again having some serious conversations in the background about taking over Star Entertainment.