Ian Moir's plans for DJs
As South African retail giant Woolworths plans to take over David Jones, Financial Review Sunday talks to the company's boss Ian Moir about the bidder's intentions.PT16M8S http://www.canberratimes.com.au/action/externalEmbeddedPlayer?id=d-36ktl 620 349 April 13, 2014
Woolworths Holdings chief executive Ian Moir has already identified three sites for new, smaller David Jones stores in Australia, and says his investors are now getting over their initial shock at the size of the deal. Mr Moir has returned to South Africa to meet shareholders to detail his transformative $2.15 billion takeover bid for David Jones and admitted investors were initially surprised. But he claimed investors have quickly appreciated its strategic and financial sense.
Shares in Woolworths listed on the Johannesburg Stock Exchange fell by 7.5 per cent when investors heard the news of its plans to swallow up Australia's second-biggest department store, but bounced back 2 per cent the following day.
''There was a lot of shock this side over the size of the deal, and it's a big cross-border investment for this country, so a lot of excitement too and interest in the deal,'' Mr Moir said from South Africa.
Woolworths Holdings chief Ian Moir has plans for new acquisition David Jones. Photo: Nic Walker
''People are wondering whether we have paid the right price, what we are going to do with [David Jones], is it a good investment and asking all the right questions.''
He is already examining ways to expand David Jones.
Mr Moir said David Jones' ''village-style'' store in Melbourne's Malvern - which is one-third the size of a normal David Jones store - was a model that Woolworths would roll out further.
''I think we see three obvious [sites] within the next couple of years,'' he said. ''I believe we can get to double digits in time - but it's going to take time.
''What we will not do as a business is make bad real estate decisions. So you need to make sure you have got the right demographic and the right position within that demographic.''
Mr Moir left for Woolworths' Cape Town headquarters early Friday morning after coolly lobbing a $4 a share bid for David Jones. He said investors in South Africa had realised it was a full price, but was justified given the need to gain full control of the retailer and David Jones' property assets.
''[Woolworths shareholders] are getting to understand there is an element of a premium for control but also an element of premium given there is over $600 million worth of property in there.''
Unlike rival Myer, David Jones owns its properties encompassing four buildings across its flagship stores in Sydney and Melbourne. The David Jones property portfolio was valued at $600 million two years ago with many experts believing the price would have appreciated significantly since then.
The valuation does not include so-called ''air rights'' in both cities, allowing development up to 20 floors high on the Sydney store.
Mr Moir said key institutional shareholders in Woolworths including the Public Investment Corporation, which manages the country's state-pension funds and owns 18 per cent of the company, were supportive of the bid, which will be the biggest in Woolworths' corporate history.
''Obviously investors are very keen to talk to us and I've had conversations with our biggest ones and so far so good.''
Woolworths, which has a market capitalisation of $5.6 billion and annual revenues of $3.6 billion, will need to trigger a capital raising to help fund its purchase of David Jones, and a circular to its investors is expected to be issued by May.
Daniel Isaacs, an equity analyst at South Africa's 36ONE Asset Management, said he was confident the as-yet unpriced share issue would be supported by investors.
''You've got a project in front of you that doesn't really allow for much slack,'' Mr Isaacs said.
''On the other side of the scale, taking on this project you have excellent management, and they have proved themselves previously in Australia with Country Road. A big concern in South Africa is that companies have moved previously into Australia without much success.'' Among the companies that have tried to expand into Australia are Pick n Pay.