Solomon Lew sitting pretty on just over 10pc of Myer shares

Solomon Lew now controls just over 10pc of Myer and has a seat at the table regardless of how the game develops.

Premier Investments chairman Solomon Lew and CEO Mark McInnes. Picture: David Geraghty

Solomon Lew has confirmed the speculation that, via Premier Investments, he now has his foot on just over 10 per cent of Myer. There’s likely to be a lot more speculation before he reveals what he’s up to.

There are many theories as to why Lew launched Premier’s $100 million or so raid.

If the raid conforms to Lew’s normal mode of operations, there are probably a number of potential explanations.

Lew’s a vastly experienced sharemarket operator. He’s been in and out of market situations, particularly the retailers, since the 1970s. Apart from the former Adelaide department store group, John Martin, where he inadvertently ended up in temporary control in the early 1980s, and one other exception, until Premier ­acquired Just Group in the aftermath of the financial crisis, he’s been more of a trader than a strategic buyer.

The “other’’ strategic retail ­acquisition was, coincidentally, a 10 per cent stake in Myer, or The Myer Emporium as it was in 1982.

Lew outlaid less than $40m for that stake, subsequently won the trust of the Myer management and family, joined the board and played a major role in the merger with Coles in 1985 that created the basis for his real fortune.

While his final period at Coles Myer, after being deposed as chairman, was unhappy, Lew gained his revenge — and more than $1bn in cash — when he enticed Kohlberg Kravis Roberts to make a bid approach in 2007 which ultimately flushed out the $19.7bn bid from Wesfarmers.

Now, the much-anticipated Lew move on Myer has occurred, but with no certainty as to what might happen next. Premier, in disclosing the “strategic investment’’ of 10.77 per cent of Myer, said it did not “currently intend’’ to make a takeover offer.

At Premier, where the Smiggle brand has created a global opportunity and the Peter Alexander brand has international potential, Lew and former David Jones chief executive Mark McInnes are managing to generate growth in a difficult retail environment.

Myer is 18 months into a new five-year strategy that is showing promising glimpses of improvement to its bottom line, but the sales momentum disappeared in the first half of this financial year. Myer is a distraction one wouldn’t have expected Lew to take on.

One thesis is that he wants a seat at the table after hearing rumblings that South Africa’s Woolworths, which now owns DJs and Country Road, might make a bid for Myer.

When Woolworths (which owned nearly 90 per cent of Country Road at the time) bid for DJs — after merger proposals from Myer to DJs had been rebuffed twice — Lew acquired a blocking stake which he used to prise a massive price for the 11.8 per cent stake in Country Road he’d held obstinately for 17 years out of the South Africans. He walked away with a profit on the dealings of close to $200m.

If Woolworths did want to add Myer to its Australian business in pursuit of what Myer estimated would be $85m of annual synergies, the Myer shareholding would enable him to reprise the very successful and profitable intervention he made in its DJs bid.

Equally, given that Premier is stocked with people with department store management expertise, including Lew himself and McInnes (who ran DJs very successfully for some years), he could be trying to get his foot on the company to deter or block a bid and keep alive the option of a Premier merger with Myer.

He could also be trying to gain leverage to protect the supply arrangements his private companies have with Myer and perhaps develop a working relationship between the Premier Retail brands and Myer. Or, it could be just a value-driven view that Richard Umbers and his team at Myer might have got the new formula for the group right.

Indeed, if Lew is pursuing his normal game plan, it could be all of the above. He has a seat at the table now regardless of whatever game develops.