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Woolies gets go-ahead for David Jones deal from Reserve Bank
![Woolies gets go-ahead for David Jones deal from Reserve Bank](https://biz-file.com/c/1405/198304.jpg)
In April‚ the group said it would buy the department store chain - one of Australia's oldest and most prominent.
Also known as DJs‚ David Jones operates 38 stores‚ which sell items such as clothing‚ high-end beauty products and a small selection of wine and gourmet foods.
The acquisition supports Woolworths' strategy to create a southern hemisphere retailer with meaningful scale. This would make it better able to compete with global retailers such as Zara and H&M by leveraging common fashion seasonality and improved sourcing while making use of South African design‚ buying and procurement facilities.
Woolworths‚ whose profits have grown 20% a year over the past five years‚ has increased its focus on apparel‚ investing in new systems and a merchant academy to train its buyers and designers‚ which has cut lead times as it has concentrated on quick-response fast-fashion.
On Friday‚ the group said it had posted a circular that contained the full details of the proposed acquisition as well as a notice of a general meeting to be held on June 17 at which the Woolworths shareholders will be asked to approve all the resolutions in respect of the deal and matters pertaining to the implementation of the proposed rights offer.
Funding of the deal will be split between R3.98bn from an Australian bridge facility‚ R10bn from a combination of a short-term facility and Woolworths cash‚ and the balance of R9.37bn from an equity bridge.
"Subject to shareholder approval‚ we intend to undertake a rights offer in order to repay the equity bridge facility after the acquisition has been completed.
"We will determine the detailed terms of the rights offer‚ including the amount of financing to be raised‚ the offer price and the number of shares to be issued‚ taking into consideration market conditions at the time.
"Once finalised‚ the details will be released on Sens and will be set out in the proposed rights offer circular to be posted to shareholders in due course‚" the retailer said.
The deal trumps US giant Walmart's R16.5bn buyout of Massmart as South Africa's largest retail sector transaction.
The David Jones deal will result in the group's Australian revenue growing from 20% of the retailer's total revenue in the first half of this year to about 43%.
Synergies of at least R1.4bn a year in earnings before interest and tax are expected within five years as Woolworths grows David Jones's private label from 3% to 20% and introduces an improved customer loyalty programme.
The deal is expected to be completed by mid-July.
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