Has Solly Lew teamed up with David Jones for a tilt at the
floundering Myer department store chain? That’s the word from inside
Coles Myer, where uncertainty is rife after CEO John Fletcher strongly
hinted last week that Myer will be sold.

But
with only ten of the 61 stores thought to be profitable, a
Franklins-style break-up of Myer has also emerged as a possibility. If
true, Lew and David Jones would have a plan to carve up parts of the
empire, but Harris Scarfe CEO Robert Atkins is also talking up his
company’s interest in taking on some of the more troubled
outer-suburban stores.

Private equity firms CVC and Newbridge
have also been mentioned in reports, but the big question remains
whether Coles Myer will conduct the break-up itself or leave this to
the new owner.

The Coles Myer board would be keen to avoid the
embarrassment of emulating the AMP and Mayne boards, which saw the
Stanbroke Pastoral business and Mayne hospital business sold as an
integrated operation and then profitably broken up by the new owner.

Overpaid
Myer CEO Dawn Robertson is in an interesting position because her
five-year contract included an additional $1 million payment if she was
sacked inside three years, but that deadline passed on 12 May.

The
new owner would be unlikely to retain Robertson, who’s paid more than
$3 million a year. Rumours remain that Fletcher is a fan and plans to
recreate the position of CEO general merchandise so Robertson would sit
above those running Target, Kmart and Officeworks after Myer was
disposed of.

The papers are now full of speculation about the sale, as you can see from these reports in The Australian and the Herald Sun.

You
would assume the Coles Myer board would be reluctant to do a deal with
Lew given his three-year campaign against them since he was ousted in
2002. Last week Lew slammed the latest revenue figures as “the lowest
growth rate for the third-quarter sales since 1994.”

Therefore,
if Lew was genuinely interested in some of the Myer stores it would
make sense to team up with David Jones, and he knows DJs’ CEO Mark
McInnes from his time working at Myer.

McInnes has said he’s
only interested in about ten Myer stores, and the big issue remains the
flagship Melbourne store, the largest of its kind in the southern
hemisphere. Unlike the rest of the portfolio, this property is owned by
Coles Myer and is worth an estimated $300 million, whilst the rest of
the business is valued at about $600 million.