9 April 2014

Woolworths South Africa to acquire David Jones to create a leading southern hemisphere retailer

Overview

Woolworths Holdings Limited (JSE: WHL) ("WHL") offers R21.4 billion (A$2.1 billion)1 to acquire the entire issued share capital of David Jones Limited (ASX: DJS) ("David Jones") for cash consideration of A$4.00 per share.

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.

WHL's offer price represents a 25.4% premium to the closing David Jones share price on 8 April 2014.

The combination of WHL and David Jones will create a leading southern hemisphere retailer with pro-forma combined FY13A revenue of over R51 billion (A$5.7 billion) from 1,151 stores across 16 countries, with approximately 43% of sales generated in Australasia2.

The Combined Business

David Jones is an iconic Australian brand and occupies a similar customer positioning to Woolworths in South Africa at the premium end of the apparel business, with both businesses enjoying strong aspirational brand identities and a strong alignment of values that put the customer first, offering excellent service and quality. David Jones is one of Australia's oldest and most prominent department stores. It operates 38 department stores across Australia and owns its flagship stores in Sydney and Melbourne.

WHL has operated successfully in Australia for over 15 years through its subsidiary, Country Road Group, which operates the Country Road, Trenery, Witchery and Mimco brands.

The combination of WHL and David Jones provides 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 the ability to leverage shared seasonality and trends, improving value for the customer and overall profitability. Each business will be well equipped to compete with global retailers in their respective markets.

1A$ figures are converted at the R/A$ exchange rate of 9.95, the current forward exchange rate which is expected to be in line with the spot rate at completion.

2A$ figures are converted at the R/A$ exchange rate of 9.12, the daily average of the exchange rate from 29/07/2012 to 27/07/2013, being the 52 weeks period of David Jones' financial year 2013.

WHL will become one of the top 10 global department store operators, focussed on the southern hemisphere. It will become one of the largest companies listed on the Johannesburg Stock Exchange ("JSE"), retaining its headquarters in Cape Town.

Strategic Opportunities

Working together with David Jones' highly capable management team, WHL plans to accelerate David Jones' strategic initiatives to consolidate and grow its competitive position and performance. WHL has identified the following key initiatives which it believes will deliver synergies of at least R1.4 billion (A$130 million) per annum in earnings before interest and tax per annum within five years. These initiatives include:

  • profitable expansion of the David Jones private label product offering;
  • overall group profitability improvement and better product pricing through increased volumes and group-wide lower cost sourcing;
  • the introduction or expansion of the WHL brands within David Jones stores;
  • continuing to provide a strong platform for independent brands;
  • the introduction of an improved loyalty programme based on existing WHL knowledge and expertise;
  • significantly increasing omni-channel initiatives and presence; and
  • rolling out of village format stores and improving existing store productivity.

As part of this, WHL is committed to developing its local South African supply chain, thus boosting Southern African Development Community exports. WHL would seek to leverage this supply base and identify opportunities to export such goods under WHL brands to Australia.

WHL's Chief Executive Officer Ian Moir said: "This transaction provides us with the scale and opportunity to deliver significant benefits to our shareholders, and our customers in South Africa and Australia.

We have great respect for David Jones – it is a truly iconic Australian retail business. 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. The combination will create one of the world's largest department stores with meaningful scale, able to leverage common fashion seasonality with enhanced sourcing capability.

We will work with the David Jones management team to deliver the sound strategies they have already set in place. Woolworths will bring additional capabilities, financial strength and significant scale to accelerate these strategies and offer a greatly enhanced value proposition, delivering on-trend product as part of the most exciting and innovative shopping experience in the market.

We have a track record of successfully developing and growing our businesses in both Australia and South Africa. Our significant presence in Australia commenced over 15 years ago with Country Road and we look forward to strengthening it further as we build David Jones into a business much better positioned to compete successfully in the southern hemisphere retail market of the future.

I encourage David Jones shareholders to support our proposal. We believe this is a compelling offer, with a premium that reflects our high regard for the business, but also an opportunity to secure a strong and vibrant future for David Jones and its customers."

The Proposed Acquisition

WHL believes the offer is highly compelling for David Jones shareholders. Under the proposal, David Jones shareholders would receive A$4.00 cash per share, which represents a 25.4% premium to the David Jones closing price on 8 April 2014, being the last day immediately prior to announcement.

The transaction is to be implemented by way of a Scheme of Arrangement ("Scheme") between David Jones and its shareholders.

The David Jones board of directors has resolved to unanimously recommend that David Jones shareholders vote in favour of the Scheme, in the absence of a superior proposal and subject to an Independent Expert concluding that the Scheme is fair and reasonable and in the best interests of David Jones shareholders. Subject to the same qualifications, each David Jones director will also vote any David Jones shares they own, or control, in favour of the Scheme.

The acquisition is classified as a Category 1 transaction for WHL under the Listing Requirements of the JSE. Accordingly, WHL will also be seeking approval from its shareholders for the acquisition, as well as other approvals required in relation to the proposed rights offer.

Funding

WHL intends to fund the offer consideration via a combination of existing cash, new debt facilities and equity funding to be raised by an underwritten renounceable rights offer to be launched soon after the transaction completes. For the purposes of funding the transaction at completion, WHL has secured an equity bridge facility which will be repaid with the proceeds of the proposed rights offer.

The funding required has been underwritten by Citi, J.P. Morgan and Standard Bank (the "Funders"). The Funders have provided WHL with a commitment letter to fund the offer under the Scheme and related transaction costs.

Indicative Timetable

The transaction is subject to a number of conditions outlined in the Scheme Implementation Deed entered into between WHL and David Jones, including approvals by both sets of shareholders. The indicative transaction timetable is as follows:

Event 2014
Posting of the circular to WHL shareholders mid May
First Scheme court hearing* mid-late May
Posting of scheme booklet to David Jones shareholders* late May
General meeting of WHL shareholders mid June
Scheme meeting of David Jones shareholders* late June
Second Scheme court hearing* late June – early July
Scheme effective date* early July
Scheme record date* early-mid July
Scheme implementation date and payment of offer consideration* mid July
* applicable to David Jones shareholders only  

The above dates are subject to variation. WHL shareholders and holders of preference shares will be advised from time to time of any such variations through an updated timetable published on the JSE Securities Exchange News Service. A further announcement will be released by WHL in due course providing final salient dates and times.

Information Portal

For ease of access, an information portal relating to the Proposed Acquisition has been created on the WHL website, hosted at www.woolworthsholdings.co.za where all information relevant to the Proposed Acquisition will be maintained. Note that this portal also includes a presentation to WHL Investors. David Jones' ASX announcement and all information relevant to the Scheme is expected to be made available on the Company Announcements Platform of ASX hosted at www.asx.com.au.

Media Conference

Woolworths Holdings Limited Group Chief Executive Officer, Ian Moir, will host a media conference call on 9 April 2014 at 10.30am SA time to discuss the proposed acquisition.

Teleconference: South Africa (Toll-Free) 0 800 200 648
  South Africa – Cape Town 021 819 0900
  South Africa – Johannesburg 011 535 3600
  South Africa – Johannesburg Alternate 010 201 6800
  UK (Toll-Free) 0808 162 4061

ENDS

Investor contacts:  
WHL  
Ralph Buddle  
Head of Corporate Projects and Investor Relations  
T: +27 21 407 3250  
M: +27 83 412 4923  
   
Media contacts:  
South Africa Australia
Brunswick Hintons
   
Nic Bennett Angus Urquhart
T:+27 11 502 7300 T: +61 3 9600 1979
M:+27 71 442 2401 M: +61 402 575 684
   
Carol Roos Nerida Mossop
T:+27 11 502 7300 T: +61 3 9600 1979
M:+27 72 690 1230 M: +61 437 361 433

About David Jones

David Jones Limited is a high-end Australian department store chain with 38 stores located in Australia's key urban centres and central business districts. It carries numerous Australian and international brands across fashion, beauty and home product groups targeting the aspirational and premium customer segments. Founded in Sydney in 1838 David Jones is one of Australia's most prominent retailers and brands.

David Jones is listed on the Australian Securities Exchange under the code ASX:DJS. For the 52 weeks ended 27 July 2013, David Jones had revenue of A$1.8 billion (R16.8 billion) and net profit after tax of A$102 million (R926 million)3.

About WHL

Woolworths Holding Limited is a South African-based retail group. In South Africa, the group trades through Woolworths (Proprietary) Limited, a respected chain of retail stores offering discerning customers a selected range of quality clothing, food, homeware, beauty and financial services under its own brand name. Woolworths Holdings also owns ~88% of Country Road Limited, a leading clothing and homeware retailer listed on the ASX under the code ASX:CTY.

WHL is listed on the Johannesburg Stock Exchange trading under the code JSE:WHL. For the 53 weeks ended 30 June 2013, WHL had revenue of R35.4 billion and net profit after tax of R2.6 billion.

Financial advisers to WHL:

Rothschild
Standard Bank

Legal advisers to WHL:

Gilbert +Tobin
Webber Wentzel
Linklaters

Transaction Sponsors to WHL:

Standard Bank

Joint bookrunners and co-underwriters to WHL:

Standard Bank
Citi
J.P. Morgan

3A$ figures are converted at the R/A$ exchange rate of 9.12, the daily average of the exchange rate from 29/07/2012 to 27/07/2013, being the 52 weeks period of David Jones' financial year 2013. Net profit after tax excludes the impact of the Dick Smith transaction.

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

Certain statements in this announcement may be considered forward-looking. Although WHL believes that the expectations reflected in any such forward-looking statements relating to the proposed acquisition are reasonable, the information has not been reviewed or reported on by the reporting accountants and auditors and no assurance can be given by WHL that such expectations will prove to be correct. WHL does not undertake any obligation to publicly update or revise any of the information given in this announcement that may be deemed to be forward-looking.

DISCLAIMERS

The release, publication or distribution of this announcement in certain jurisdictions may be restricted by law and therefore persons in such jurisdictions into which this announcement is released, published or distributed should inform themselves about and observe such restrictions.

This announcement is not an offer for the sale of securities. The securities discussed herein have not been and will not be registered under the US Securities Act of 1933 (the "US Securities Act"), or under any securities laws of any state or other jurisdiction of the United States and may not be offered, sold, taken up, exercised, resold, renounced, transferred or delivered, directly or indirectly, within the United States absent an exemption from, or in a transaction not subject to, the registration requirements of the US Securities Act and in compliance with any applicable securities laws of any state or other jurisdiction of the United States. The Company does not intend to register any part of the proposed Rights Offer in the United States.

Woolworths Holdings Limited (JSE: WHL) ("WHL") offers R21.4 billion (A$2.1 billion)1 to acquire the entire issued share capital of David Jones Limited (ASX: DJS) ("David Jones") for cash consideration of A$4.00 per share.