Sentiment and realism collide as DJs goes offshore
There may have been a nationalist vibe in the room this morning, but David Jones shareholders still voted overwhelmingly to accept the $4 a share offer from Woolworths of South Africa.
The takeover of a 175-year-old Australian company — and retail icon — led to some last-minute laments by shareholders. One took to the floor to query what would happen to the in-store pianists, which “add a touch of class … which place it on a level above other department stores”.
But the need to retain pianists was no match for the cash lure, in the end.
Proxies lodged ahead of today’s shareholder meeting in Sydney’s drab Wesley Centre were voted overwhelmingly in favour of the takeover of DJs. The vote passed with 97% support and 3% voting against. Billionaire Solomon Lew, with a 10% stake (approximately 53 million shares), is believed to have abstained — which should ensure ASIC does not move to block the takeover. Woolworths owns 88% of Country Road, while Lew owns the remaining 12%. Reports have suggested that Woolworths would only buy the 12% from Lew if the vote on David Jones passed.
Even if Lew had voted against the takeover it was unlikely he could have blocked it: the “no” vote would only have been lifted to 18%, short of the 25% required to stop a scheme of arrangement.
Court approval is required for takeovers by scheme and ASIC went to court to argue Lew was receiving a collateral benefit in the form of Woolworths’ above-the-odds takeout offer for his 12% stake in listed retailer Country Road. The court ruled against ASIC and David Jones chairman Gordon Cairns referred to the ruling and called the Country Road bid a sideshow.
This morning, the Australian Shareholders Association voted in favour of the offer, although representative Stephen Mayne, founder of Crikey, questioned whether shareholders could have received $4.20 a share had the money thrown into the Country Road bid been spread among DJs shareholders.
Cairns rejected the argument, saying Woolworths had made clear its $4 offer was final.
Cairns told the floor that when Lew bought into DJs, “I personally called him and asked him how I could help as he was now a significant shareholder”, but he wouldn’t comment on the discussion. He did say there was no canvassing of Lew’s supply contracts with DJs.
DJs got a strong turnout from retail shareholders after an extensive proxy solicitation and advertising campaign.
One shareholder summed up the mood of the room, thanking the DJs board for attracting such a high bid after a period of management and board incompetence which culminated last year in the resignation, on principle, of chief executive Paul Zahra. There was also an ASIC investigation into insider trading after former chairman Peter Mason allowed two directors to buy shares ahead of release of an upbeat sales quarterly. ASIC decided not to act but Mason ultimately stepped down.
“This company was going down down down,” the shareholder said. “There’s been pathetic chairing of this company, people on this board who have not been up to the job. I commend you for what you’ve brought … at least we can get $4 and get out. I would commend the proposal. Yes, many of us are disappointed … other iconic companies have been taken down by incompetent boards too.”
Despite the strong “yes” vote there was palpable disappointment at the loss of an iconic Australian company. One shareholder said she would vote against: “we’ve had 175 years of being Australian. If Woolworths thinks our firm is worth $4 a share why can’t we as Australians continue … and make it the same quality as Woolworths is building?” Questioners from the floor also raised the future of DJs landmark real estate.
Many of the elderly shareholders clearly are long-time DJs customers which raises the question how much loyalty they will show in the future.
In the end, though, the money in the hand was way too attractive.
Lew’s representative was in the room, but resisted Mayne’s appeals to speak up, choosing to remain silent. Now for Lew to draw a line under the 17-year Country Road saga and spend his $170-odd million windfall profit …