David Jones Appoints Advisor to Help Look into Myer Merger Deal Offer, Shareholders Skeptical
By Esther Tanquintic-Misa | March 19, 2014 2:11 PM EST
Australia's second-biggest department store chain, David Jones Ltd, has appointed an advisor to help look into the A$3.4-billion ($3.09-billion) merger offer being flaunted by much bigger rival Myer Holdings Ltd. This after it rejected a proposal earlier lodged by the latter in just less than two months ago.
A couple hold hands as they walk through downtown Sydney with their shopping from Australian department store retailer Myer, March 6, 2014. Australian retail sales surged by the most in almost a year in January and exports jumped to record highs, clear evidence the resource-rich economy is stepping up a gear even as a boom in mining investment cools. REUTERS/Jason Reed
The department store chain said in a statement management consultant Port Jackson Partners Ltd has been hired to assess the value of "synergies that can be extracted" should it approve to merge with Myer.
"It will enable us to have a full understanding of the value that can be delivered to our shareholders if David Jones were to merge with Myer, versus the value that can reasonably be expected to be delivered to our shareholders if the company continues with its Future Strategic Direction Plan on a stand-alone basis," David Jones chairman Gordon Cairns said.
"Once this work is completed, we will be in a position to engage in a meaningful way with Myer."
But Simon Marais, a major shareholder in David Jones as well as director and portfolio manager of Allan Gray, is skeptical of the appointment.
''Why do people always need advisers? I don't really know, I thought that was why the board was there,'' Mr Marais said.
''I think they should definitely engage with Myer, but that doesn't mean they should do a deal,'' Mr Marais said, noting two department stores lording over Australia which isn't really that big "is a shrinking business.''
Allan Gray owns a 6 per cent shareholding in David Jones.
It was only in late January 2014 that David Jones rejected a proposal by Myer Holdings saying the proposal "did not represent sufficient value for David Jones shareholders."
Myer earlier proposed a merger offer of 1.06 shares for every David Jones.
''It is imperative that we undertake this initial strategic work prior to commencing discussions with Myer," Mr Cairns said in a statement released to the ASX statement explaining the appointment of advisers.
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