Broader implications of DJ’s and Myer union unclear, including DJ’s deal with Dick Smith
In a new letter to the rival retailer, dated 20th February, Myer reiterated its interest in a merger between the two companies.
David Jones has confirmed it received a letter from Myer Chairman Paul McClintock reiterating its interest in a merger, which would change the retail landscape irrevocably, if approved by ACCC and shareholders.
The deal could be worth $3 billion, reports suggest.
David Jones board says it “will consider any proposal which is on terms that are in David Jones shareholders’ best interests,” meaning a merger could now be on the cards after the initial refusal last year.
The board “will respond to Myer in due course,” it confirmed in a statement to ASX, yesterday.
The implications for Dick Smith, who has a five year Retail Brand Management Agreement with David Jones are unclear.
Both high street department stores have struggled to make traction in hugely competitive electronics. Dick Smith who this week announced strong first half 2014 profits, sales attributed, in part, to its presence within David Jones, was not available for comment at the time of writing.
In the letter addressed to DJ’s Chairman Peter Mason, McClintock expressed his belief the merger is “highly compelling, creating a sustainable more competitive retailer and delivering significant value for shareholders of both companies.”
He also cited $85m of cost synergies that could be achieved, but sought to address concerns on whether the proposal of a stock nil premium is fair to shareholders.
“We are open to discussing the transition structure including the basis on which your property portfolio could be separated out from the department store business,” he wrote.
Myer also confirmed Bernie Brookes will stay on as CEO, and will continue in his role beyond his original contract due to end in August 2014, and is now on an ‘open term ‘contract.
Brookes confirmed his commitment to becoming a potential CEO for the “merged entity”.
McClintock said: “While we have made clear the selection of the CEO for any future merged entity would be a shared decision by both companies, Bernie’s reappointment provides us with at least one option for that role.”
