10 April 2014
South African retailer Woolworths is set to buy Australian department store chain David Jones for R21.4-billion (A$2.1-billion), in a deal that will create a leading southern hemisphere retailer with 1 151 stores across 16 countries.
The deal will make Woolworth one the 10 biggest department store operators in the world, and one of the largest companies listed on the Johannesburg Stock Exchange.
“We have great respect for David Jones – it is a truly iconic Australian retail business,” Woolworths CEO Ian Moir said in a statement on Wednesday. “Woolworths is a proudly South African company with an enviable history and track record. Our businesses are closely aligned in terms of our target markets, and we look forward to growing a southern hemisphere champion from our South African base.”
Woolworths has operated successfully in Australia for over 15 years already through its subsidiary, Country Road Group, which operates the Country Road, Trenery, Witchery and Mimco brands.
David Jones is an iconic Australian brand at the premium end of the clothing business, occupying a similar customer positioning in Australia to Woolworths in South Africa. “DJs”, as many know it, also stocks gourmet food and wine and high-end beauty products. One of Australia’s oldest department stores, it has 38 branches across the country and flagship stores in Sydney and Melbourne.
According to Woolworths, the combination of the two will provide “significant advantages that will benefit both companies and their customers. The group will have increased scale that will drive significant efficiencies and economies through enhanced global sourcing and be able to benefit from the shared seasons and trends.”
Working with David Jones’ management team, Woolworths plans to speed up the Australian company’s strategic initiatives to improve its position and performance. The company said it had identified a number of initiatives “which it believes will deliver at least R1.4-billion (A$130-million) per annum in earnings before interest and tax per annum within five years”.
As part of this turnaround strategy, Woolworths said it was committed to developing its South African supply chain and boosting exports from the southern African region.
“All the products that we have from South Africa and the SADC [Southern African Development Community] countries, which is about 40% of our total offer, will flow into David Jones,” Moir told Business Day on Wednesday.
The transaction is subject to a number of conditions, including approvals by both sets of shareholders
According to Woolworth, the David Jones board of directors “has unanimously resolved to recommend its shareholders vote in favour of the transaction, in the absence of a superior proposal and subject to an independent expert concluding that the transaction is fair and reasonable and in the best interests of David Jones shareholders”.