Myer’s deal to buy Solomon Lew’s Premier apparel brands deemed ‘fair and reasonable’
Myer’s billion-dollar deal to buy apparel brands from Solomon Lew’s Premier Investments has been deemed ‘fair and reasonable’ by an independent expert.
Billionaire retailer Solomon Lew, who was unceremoniously ejected from the old Coles Myer board more than 20 years ago, is one step closer to re-entering the Myer board and becoming its single largest shareholder after an independent expert deemed Myer’s billion-dollar purchase of his apparel brands “fair and reasonable”.
Both shareholders in Myer as well as Mr Lew’s listed fashion empire Premier Investments were urged to vote in favour of the acquisition when both hold back-to-back shareholder meetings on January 23 in Melbourne, with Myer gaining access to a portfolio of fashion brands and Premier Investments taking Myer shares that it will then distribute to its own shareholders.
Mr Lew’s long-time private investment vehicle, Century Plaza, which is the largest shareholder in Premier Investments, will emerge as the biggest investor in Myer, after Myer stock is distributed, with Mr Lew then expected to be invited to join the Myer board a an independent director and sit next to his friend and colleague, former corporate raider Gary Weiss, Myer’s deputy chairman and lead independent director.
Although Myer has long been jettisoned from Coles, it does partly realise Mr Lew’s dream of regaining boardroom oversight of the 124-year-old department store, soon to also house his five fashion and apparel brands that sat within Premier Investments.
On Tuesday Myer and Premier Investments released their explanatory memorandum and booklet to detail the proposal in which Myer will buy Premier Investments’ Apparel Brands division – Just Jeans, Dotti, Portmans, Jacqui E and Jay Jays – for 890.5 million Myer shares (current value $1.068bn), which will be then be distributed to Premier shareholders – of which billionaire retailer Mr Lew is the largest shareholder. Premier Investments will transfer to Myer $82m in cash as part of the deal.
The 278-page explanatory memorandum issued on Tuesday by Myer has concluded that the deal is not unfairly favourable to non-associated Myer shareholders, namely Mr Lew and his fashion empire Premier Investments, with Myer executive chair Olivia Wirth now making her pitch to her shareholders to vote in favour of the deal on January 23.
Premier Investments, whose board has unanimously supported the bid, will also hold its shareholder vote on January 23. Premier Investments, which currently has a 31.16 per cent stake in Myer, will not vote its shares at the Myer meeting. Mr Lew will vote his shares in favour of the deal at the Premier Investments meeting.
Ms Wirth has championed the deal to investors, saying it will vastly grow Myer’s presence in the retail sector, allow it to leverage its highly popular Myer One loyalty scheme to the new apparel brands, and give it a much wider and deeper shareholder base.
If supported by shareholders, Myer – traditionally a department store owner – will take ownership of the five apparel brands to turn it into a new, more powerful retail presence in Australia with 783 department and specialty stores, 17,300 staff and combined sales of more than $4bn.
“The combination of Myer and Apparel Brands, which comprises much-loved brands Just Jeans, Jay Jays, Portmans, Dotti and Jacqui E, is transformational for our business,” Ms Wirth said in a letter to shareholders accompanying the explanatory memorandum.
“Bringing together two highly complementary businesses, the combination of Myer and Apparel Brands creates a leading omni-channel retail platform of significant scale across Australia and New Zealand with pro forma historical annual sales of more than $4bn in fiscal 2024, a large and highly engaged customer base, and a stronger balance sheet to fund future investment and growth.”
The deal raises a corporate governance obstacle course that Myer and Premier Investments will need to navigate through, and convince shareholders it is in their best interests. Following the deal, Premier Investments will cease being Myer’s largest shareholder, and instead Mr Lew personally will emerge as Myer’s largest shareholder with a stake to about 6.8 per cent. Mr Lew will remain Premier Investments’ largest investor, with a 40 per cent stake.
The proposal has the support of Myer’s independent directors, as well as being deemed “fair and reasonable” by the independent expert Kroll Australia.
“The Myer independent directors unanimously recommend that Myer shareholders vote in favour of the combination resolution, subject to the independent expert continuing to conclude that the combination is either fair and reasonable, or not fair, but reasonable to non-associated Myer shareholders,” the Myer booklet states.
In her pitch to investors, Ms Wirth said the Myer independent directors had concluded that the purchase of the apparel brands business from Premier Investments is compelling for Myer shareholders for a range of reasons, including creating a leading Australian omni-channel retail platform with significantly enhanced scale and capabilities to drive growth and operating leverage benefits.
She said the deal would also introduce Apparel Brands’ highly complementary customer base to Myer’s leading loyalty program, Myer One, driving enhanced cross-shop opportunities and incremental sales growth across the combined group.
“(The deal) offers potential to take advantage of enhanced capabilities in product development, design, sourcing and distribution to deliver improved margins for the combined group and is expected to generate annual pre-tax earnings benefits of at least $30m on a run-rate basis over the short to medium term and delivers significant EPS accretion on a pro forma fiscal 2024 basis,” she said.
Ms Wirth added that the deal would deliver an enhanced balance sheet and greater capacity to invest in growth across the combined group and would expand and diversify Myer’s shareholder base following the in specie distribution by Premier, with improved share trading liquidity and access to capital.
Under the share sale and implementation agreement, Myer will issue 890.5 million shares to Premier in consideration for the acquisition of the Apparel Brands business, which will retain $82m of cash. Following the issuance of consideration shares, Myer shareholders (including Premier by reason of its existing shareholding) will hold 48.5 per cent of issued capital in Myer, while Premier will receive 51.5 per cent of issued capital in Myer.
The Myer shares will then be distributed to Premier Investments shareholders.
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