Billionaire Solomon Lew rejects a ‘standstill’ plea from Myer board unless he lobs takeover bid
Solomon Lew is on a collision course with Myer after rejecting a request from the retailer’s chairwoman to stop building his shareholding unless he makes a takeover bid.
Solomon Lew is on a collision course with Myer after rejecting a direct request from the retailer’s chairwoman, JoAnne Stephenson, to stop increasing his shareholding unless he makes a takeover bid for the entire company.
Mr Lew, already the company’s largest investor, has also refused to commit to a majority independent Myer board as requested by the department store chair.
The dispute was outlined in an annual meeting notice released by Myer on Monday, in which Premier Investments, a retailer controlled by Mr Lew, has nominated former Myer Grace Bros boss Terence McCartney for the board.
Mr McCartney is a director of Premier Investments, and the Myer board has declined to make a recommendation to shareholders on whether to support – or reject – his election.
Myer annual meetings have in the past descended into public disputes, including in 2020 when the company’s then chairman, Garry Hounsell, was forced to quit only hours before the start of the meeting after it became clear Mr Lew and other investors would not support his re-election.
Premier Investments, with a 23 per cent stake in Myer, could now push for Ms Stephenson to step aside.
In commentary in the meeting notice, Myer revealed it had written to Mr Lew’s Premier Investments on September 7 asking that he stop buying shares in the retailer unless he makes a takeover offer. Myer sought assurances on the independence of Mr McCartney, and protocols for dealing with conflicts of interest – and perceived conflicts of interest – between the businessman, Myer and his directorship of Premier Investments.
On September 20, Premier Investments responded, expressing surprise about the request and describing it as “inappropriate”.
Myer told investors that Premier Investments had “declined to comment on the company’s fundamental policy that at all times the majority of the board of Myer should be independent directors with an independent chairman”.
Mr Lew’s refusal to comment on Myer’s request that its board remain majority independent and led by an independent chairman signals his interest in placing more than one director on the board. The documents released on Monday show the Myer board was open to talks with Mr Lew’s Premier Investments on Mr McCartney’s nomination, given his position on the board of Premier Investments and its Just Group subsidiary, which both operate apparel and accessories brands in the same market as some of Myer’s brands.
Myer has opened the door to Mr McCartney joining the board, given his retail experience, and said the board would work with him, if elected, to put in place appropriate protocols in relation to actual or potential conflicts of interest and disclosure and use of confidential information.
The Myer board has not provided a recommendation to shareholders on how to vote on the issue. “However, in the absence of an acknowledgment of the latter two fundamental matters raised in the company’s letter to Premier of 7 September 2022, and noting that the nomination was made directly by a shareholder … the board considers that this is a matter to be determined by the shareholders, without a recommendation of the board,” the notice of meeting reads. “The board has therefore not made a recommendation as to whether shareholders vote in favour or against Item 4, being the election of Mr McCartney. The board would need to be satisfied that existing and potential commercial conflicts of interest are able to be managed in accordance with Myer’s policies and an appropriate protocol agreed with Mr McCartney. There would need to be restrictions on the disclosure and use by Mr McCartney of Myer’s confidential information, which the company would seek to deal with through information sharing protocols.”
However, in a letter to shareholders, Ms Stephenson and Myer chief executive John King argue that the board currently has the right mix of skills and independence, signalling opposition to Mr McCartney.
In September, Myer posted its strongest second-half profit in almost 10 years and resumed paying a final dividend.
Myer posted a net profit after tax of $60.2m for the 52 weeks to July 30, against $51.7m in the previous year. After adjusting for JobKeeper payments, the 2022 profit was 103.8 per cent higher.
The company recorded sales growth of 74.8 per cent in the first six weeks compared to last year, and 21.8 per cent over pre-pandemic levels. It was Myer’s best sales start since 2006.
Myer declared a final dividend of 2.5c per share, to be paid on November 7. It paid an interim dividend of 1.5c per share this year.
At the time, Mr King said the results showed how his plan continued to deliver and gain momentum. “We have clearly established strong digital and data credentials in recent years, evidenced by the growth in online and Myer One. However, the true strength of our business is its multichannel opportunity,” Mr King said.
In 2013 Myer proposed a $3bn share-based merger with up-market rival David Jones, dubbed at the time a “merger of equals”, that would have created a department store powerhouse with annual sales of $5bn and a network of more than 100 stores.
At that time of the Myer merger offer, Mr Lew was not a major shareholder in the company.
However, he was – and remains – one of the biggest suppliers of fashion and apparel to the department store chain.
In late September, Premier Investments posted better than expected revenues and profits – and declared almost $200m in ordinary and special dividends.
Stronger trading by Myer’s department stores and its improving share price saw the value of Premier Investments’ stake in Myer grow by $12m over 2022.
Premier Investments, whose brands also include Smiggle, Just Jeans and Dotti, said at the time that it had bounced back from Covid-19 lockdowns to post record sales and earnings for 2022.
Mr Lew, whose family own 42.43 per cent of Premier Investments, will pocket $84.4m in dividend payments for 2022 and could also see his stake in the fashion retail owner grow slightly if he doesn’t sell into a share buyback.
The profit was ahead of market consensus of net earnings of $248.1m, while the company’s revenue for the year was also ahead of expectations of around $1.45bn.
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