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Proposed Acquisition by Woolworths Holdings Limited of David Jones Limited and Cautionary announcement
WOOLWORTHS HOLDINGS LIMITED
(Incorporated in the Republic of South Africa)
Registration number 1929/001986/06
Share code: WHL ISIN: ZAE000063863
(“WHL” or “the Company” or “the Group”)
NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, IN WHOLE OR IN
PART, DIRECTLY OR INDIRECTLY, IN, INTO OR FROM THE UNITED STATES
OR ANY JURISDICTION WHERE TO DO SO WOULD CONSTITUTE A
VIOLATION OF APPLICABLE LAW OR REGULATION
ANNOUNCEMENT REGARDING THE PROPOSED ACQUISITION BY WHL OF DAVID JONES LIMITED
(“DAVID JONES”) AND CAUTIONARY ANNOUNCEMENT
1. INTRODUCTION
The board of directors of WHL (the “Board”) is pleased to announce that it has
reached agreement with David Jones to acquire, through a wholly-owned
Australian subsidiary, the entire issued share capital of David Jones, a major
Australian department store retailer, at a cash price of A$4.00 per share
(the “Proposed Acquisition”), representing a total cash consideration of A$2.1
billion (approximately R21.4 billion) (the “Consideration”).*
The Proposed Acquisition will be implemented by way of a Scheme of
Arrangement (“Scheme”) between David Jones and its shareholders under the
Australian Corporations Act 2001 (Cth) (“Corporations Act”). WHL entered into a
Scheme Implementation Deed (“SID”) with David Jones on Wednesday, 9 April
2014, which governs the implementation of the Scheme. The David Jones board
of directors (“David Jones Board”) unanimously recommend that the David Jones
shareholders (“David Jones Shareholders”) vote in favour of the Scheme, in the
absence of a “Superior Proposal” (as defined in the SID) and subject to an
Independent Expert concluding that the Proposed Acquisition is fair and
reasonable and in the best interests of David Jones Shareholders.
The SID contains terms and conditions customary for a transaction of this nature,
including exclusivity provisions and allowance for a break fee to be paid to WHL
in certain circumstances if the Scheme does not proceed.
After completion of the Proposed Acquisition, David Jones will become a wholly-
owned subsidiary of WHL and will be delisted from the Australian Securities
Exchange (“ASX”). In addition, it will comply with paragraph 10.21 of Schedule
10 of the Listings Requirements of the JSE Limited (“JSE”) in terms of its
Memorandum of Incorporation.
The Proposed Acquisition is classified as a Category 1 transaction for WHL under
the Listings Requirements of the JSE.
* Unless otherwise noted, all A$ figures have been converted at the R/A$
exchange rate of 9.95, the current forward exchange rate which is expected to be
in line with the spot rate at completion. Capitalised terms used in this section have
the same meaning as ascribed in the body of this announcement.
2. OVERVIEW OF DAVID JONES
David Jones is listed on the ASX, trading under the code ASX:DJS. David Jones
was founded in 1838 and is one of Australia’s oldest and most prominent
department stores. It operates a total of 38 stores located across Australia and
owns its flagship stores in Sydney and Melbourne. David Jones carries numerous
Australian and international brands across womenswear, menswear, beauty products,
shoes and accessories, childrenswear, electronics and general merchandise, primarily
targeting the premium and aspirational customer segment.
3. RATIONALE FOR THE PROPOSED ACQUISITION
WHL’s strategy is to further expand its international operations in order to
transform itself into a leading southern hemisphere retailer with sufficient scale to
compete effectively with global apparel retailers. The Proposed Acquisition is
aligned to this strategy, enabling the enlarged group to create significant
efficiencies and economies of scale that will over time deliver a material
improvement in profitability.
The Group already operates in the Australasian market through its subsidiary,
Country Road Limited (“Country Road”), which operates a 460 store chain in this
market under the Country Road, Witchery, Trenery and Mimco brands.
The combination of WHL and David Jones would create a substantial southern
hemisphere business with:
- 1,151 stores across 16 countries;
- a tangible asset base of approximately R21.4 billion at FY13A;^
- FY13A sales of over R51 billion;**
- apparel and homeware contributing approximately 65% of combined group
sales, based on management estimates;**
- approximately 43% of total sales generated in Australasia; and
- the potential to generate substantial operational synergies.
WHL has undertaken a detailed assessment of David Jones and believes that it
can create significant value for WHL shareholders (“WHL Shareholders”) over
time, through a number of key initiatives:
- profitable expansion of the David Jones private label product offering;
- overall group profitability improvement through increased volumes and group-
wide lower cost sourcing;
- the introduction or expansion of the WHL brands within David Jones stores;
- continuing to provide a strong platform for independent brands;
- the introduction of an improved loyalty programme based on existing WHL
knowledge and expertise;
- significantly increasing omni-channel initiatives and presence;
- roll out of successful village format stores; and
- enhanced productivity through better profiling and allocation systems and
processes.
The above initiatives are expected to deliver incremental earnings before interest
and tax (“EBIT”) of at least R1.4 billion per annum within five years after the
Proposed Acquisition.
^ A$ figures for David Jones are converted at the R/A$ exchange rate of 9.04,
the exchange rate at 27/07/2013, being the end of David Jones’s financial year
for 2013. A$ figures for Country Road are converted at the R/A$ exchange rate
of 9.01, the exchange rate at 30/06/2013, being the end of WHL’s financial year
for 2013. This pro forma combination does not calendarise David Jones’s results
to WHL’s year-end or vice-versa, or adjust tangible assets for the goodwill
created on acquisition.
** A$ figures for David Jones are converted at the R/A$ exchange rate of 9.12,
the daily average of the exchange rate from 29/07/2012 to 27/07/2013, being the
52 weeks period of David Jones’s financial year for 2013. A$ figures for Country
Road are converted at the R/A$ exchange rate of 9.05, the daily average of the
exchange rate from 25/06/2012 to 30/06/2013, being the 53 weeks period of
WHL’s financial year for 2013. This pro forma combination does not calendarise
David Jones’s results to WHL’s year-end or vice-versa.
4. PRINCIPAL TERMS AND CONDITIONS OF THE PROPOSED ACQUISITION
4.1 Purchase Consideration
WHL will acquire the entire issued share capital of David Jones at a cash
price of A$4.00 per share (the “Offer Price”), representing a total cash
consideration of A$2.1 billion (approximately R21.4 billion). The Offer
Price represents a 25.4% premium to the David Jones closing price on
Tuesday, 8 April 2014, being the last business day immediately prior to
announcing the Proposed Acquisition.
4.2 Proposed Acquisition Funding
WHL intends to fund the Consideration via a combination of existing cash
and new debt facilities, including an equity bridge facility (the “Equity
Bridge Facility”). The Equity Bridge Facility is expected to be repaid out of
the proceeds of an underwritten renounceable rights offer (the “Proposed
Rights Offer”).
The funding required (including the Equity Bridge Facility) has been
underwritten by Citibank, N.A., South Africa Branch, Citibank, N.A.,
Sydney Branch, JPMorgan Chase Bank, N.A., Johannesburg Branch,
JPMorgan Chase Bank, N.A. and The Standard Bank of South Africa
Limited (acting through its Corporate and Investment Banking division)
(“Standard Bank”) (the “Debt Funders”). The Debt Funders have provided
WHL with a commitment letter to fund the acquisition pursuant to the
Scheme and related transaction costs.
WHL intends to commence the Proposed Rights Offer once the Proposed
Acquisition has been completed. Details of the Proposed Rights Offer will
be released on the Stock Exchange News Service (“SENS”) of the JSE at
that stage. WHL has entered into a volume standby underwriting
agreement with Citigroup Global Markets Limited, J.P. Morgan Securities plc. and
Standard Bank (the “Equity Underwriters”) in relation to underwriting the Proposed
Rights Offer. The Equity Bridge Facility committed by the Debt Funders is conditional
on the underwriting arrangements remaining in force with the Equity Underwriters,
which in turn is conditional on, among other customary conditions including inter
alia: (a) WHL shareholder approvals; (b) the SID remaining in force;
(c)customary due diligence; (d) no force majeure event; and (e) no change of
control of WHL.
4.3 Scheme Implementation Deed
Under the terms of the SID, David Jones will propose and implement the
Scheme in accordance with Part 5.1 of the Australian Corporations Act.
As set out in paragraph 1 above, the David Jones Board has unanimously
agreed to recommend that David Jones Shareholders vote in favour of the
Scheme, in the absence of a superior proposal and subject to the
Independent Expert concluding that the Scheme is fair and reasonable
and in the best interests of David Jones Shareholders. Subject to the
same qualifications, each David Jones director will also vote any David
Jones shares they own, or control, in favour of the Scheme.
The Scheme will be implemented if at least 75% of David Jones shares
voted, and the majority of David Jones Shareholders voting by number,
cast their votes in favour of the Scheme at the Scheme Meeting.
The SID includes the following conditions precedent:
- WHL Shareholders approving the Proposed Acquisition (greater
than 50% by number of votes, present and voting);
- WHL Shareholders approving resolutions required to implement the
Proposed Rights Offer (at least 75% by number of votes, present and voting);
- South African Reserve Bank approval;
- Australian Foreign Investment Review Board approval;
- David Jones Shareholders approving the Scheme (at least 75% by
number of votes and greater than 50% by number of shareholders, present and voting);
- Australian Court approval;
- no legal restraint impeding completion of the Scheme;
- no material adverse change;
- no prescribed occurrences; and
- no force majeure event.
The Scheme will not become effective until and unless all the conditions
precedent are satisfied or waived. The conditions precedent are set out in
full in the SID.
Other material provisions of the SID are:
- customary exclusivity provisions such as “no shop”, “no talk” and
notification obligations on David Jones that in some instances are
subject to a fiduciary duties exception for the David Jones Board;
- a break fee of A$22 million payable by David Jones to WHL in
certain circumstances, including if the David Jones Board changes
its recommendation to David Jones Shareholders; and
- a cost reimbursement payable by WHL to David Jones for the
transaction costs it will incur in respect of the Proposed Acquisition
up to a maximum of A$5 million in certain circumstances, including
if WHL Shareholders do not approve the Proposed Acquisition.
4.4 Scheme Booklet
David Jones expects to post a booklet to David Jones Shareholders in
late May 2014 containing full details of the Scheme (“Scheme Booklet”).
The Scheme Booklet will include, amongst other things, the reasons for
the David Jones Board’s unanimous recommendation, and a copy of the
Independent Expert’s Report.
4.5 Independent Expert
David Jones will appoint an Independent Expert to opine on whether the
Scheme is fair and reasonable and in the best interests of David Jones
Shareholders.
5. CATEGORISATION AND WHL SHAREHOLDER APPROVAL
As set out in paragraph 1 above, the Proposed Acquisition is classified as a
Category 1 transaction for WHL under the Listings Requirements of the JSE. As
furthermore set out in paragraph 4.2 above, WHL intends to undertake the
Proposed Rights Offer following the Proposed Acquisition.
The convertible, redeemable, non-cumulative participating preference shares
(“Preference Shares”) created under the terms of the Woolworths Employee
Share Ownership Scheme (“ESOS”) are eligible to participate in voting on all of
the resolutions at the General Meeting. The Preference Shares are under the
control of the ESOS Trustees.
Accordingly, approval by the requisite majority of WHL Shareholders and holders
of Preference Shares present and voting at a general meeting of WHL
Shareholders (the “General Meeting”) will be required for the Proposed
Acquisition and the special and ordinary resolutions necessary to implement the
Proposed Rights Offer.
A circular to WHL Shareholders (the “Circular”) and the ESOS trustees setting
out the full terms of the Proposed Acquisition, including the notice of General
Meeting, will be posted in due course.
6. INDICATIVE TIMING
The indicative timing of the Proposed Acquisition and the Scheme, as agreed
between WHL and David Jones in the SID, are set out below. It is anticipated that
the Scheme will become effective in early July 2014, and implemented in mid-late
July 2014.
Event 2014
Posting of the Circular to WHL Shareholders mid May
First Court hearing for approval of Scheme* mid-late May
Posting of Scheme Booklet to David Jones Shareholders* late May
General meeting of WHL Shareholders mid June
Scheme meeting of David Jones Shareholders* late June
Second Court hearing for approval of Scheme* late June – early July early July
Scheme effective date* early July
Scheme record date* early-mid July
Implementation date for payment of Consideration* mid July
* Applicable to David Jones Shareholders only
The indicative timing as set out above is subject to variation. A further
announcement will be released by WHL in due course providing final salient
dates and times in relation to the Proposed Acquisition.
7. GOVERNING LAW AND JURISDICTION
The SID is governed by the laws of New South Wales, Australia and is subject to
applicable Australian laws and regulations, including the Corporations Act and
the ASX.
8. INFORMATION PORTAL
For ease of access, an information portal relating to the Proposed Acquisition has
been created on the WHL website, hosted at www.woolworthsholdings.co.za
where all information relevant to the Proposed Acquisition will be maintained,
including a copy of the SID and the investor presentation presented to investors.
David Jones’s ASX announcement and all information relevant to the Scheme is
expected to be made available on the Company Announcements Platform of ASX
hosted at www.asx.com.au.
9. CAUTIONARY ANNOUNCEMENT
WHL Shareholders are advised that the Company is in the process of completing
the pro forma financial effects of the Proposed Acquisition (the “Pro Forma
Financial Effects”) and will release a further announcement setting out the Pro
Forma Financial Effects in due course. Accordingly, WHL Shareholders are
advised to exercise caution when dealing in their WHL securities until such
information is released.
Cape Town
9 April 2014
Investor contacts:
WHL
Ralph Buddle
Head of Corporate Projects
and Investor Relations
T: +27 21 407 3250
M: +27 83 412 4923
Media contacts:
WHL South Africa Australia
Susie Squire Brunswick Hintons
Head of Corporate Affairs & Nic Bennett Angus Urquhart
PR T:+27 11 502 7300 T: +61 3 9600 1979
T:+27 21 407 7546 M:+27 71 442 2401 M: +61 402 575 684
M:+27 60 532 3999
Carol Roos Nerida Mossop
T:+27 11 502 7300 T: +61 3 9600 1979
M:+27 72 690 1230 M: +61 437 361 433
Financial advisers to WHL:
Rothschild
Standard Bank
Legal advisers to WHL:
Gilbert +Tobin
Webber Wentzel
Linklaters
Transaction Sponsor to WHL:
Standard Bank
Independent Sponsor to WHL:
Rand Merchant Bank (a division of FirstRand Bank Limited)
Joint bookrunners and co-underwriters to WHL:
Standard Bank
Citi
J.P. Morgan
Legal advisers to the Joint book-runners and co-underwriters and the Debt
Funders
Bowman Gilfillan Inc.
Latham & Watkins
Allen & Overy
About David Jones
David Jones is a high-end Australian department store chain with 38 stores located
in Australia’s key urban centres and central business districts. It carries numerous
Australian and international brands across fashion, beauty and home product groups
targeting the aspirational and premium customer segments. Founded in Sydney in
1838 David Jones is one of Australia’s most prominent retailers and brands.
David Jones is listed on the ASX under the code ASX:DJS. For the 52 weeks ended
27 July 2013, David Jones had revenue of A$1.8 billion (R16.8 billion) and net profit
after tax of A$102 million (R926 million).^^
^^ A$ figures are converted at the R/A$ exchange rate of 9.12, the daily average of
the exchange rate from 29/07/2012 to 27/07/2013, being the 52 weeks period of
David Jones’s financial year 2013. Net profit after tax excludes the impact of the Dick
Smith transaction.
About WHL
WHL is a South African-based retail group. In South Africa, the group trades through
Woolworths (Proprietary) Limited, a respected chain of retail stores offering
discerning customers a selected range of quality clothing, food, homeware, beauty
and financial services under its own brand name. Woolworths Holdings also owns
~88% of Country Road Limited, a leading clothing and homeware retailer listed on
the ASX.
WHL is listed on the Johannesburg Stock Exchange trading under the code
JSE:WHL. For the 53 weeks ended 30 June 2013, WHL had revenue of R35.4 billion
and net profit after tax of R2.6 billion.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
Certain statements in this announcement may be considered forward-looking.
Although WHL believes that the expectations reflected in any such forward-looking
statements relating to the Proposed Acquisition are reasonable, the information has
not been reviewed or reported on by the reporting accountants and auditors and no
assurance can be given by WHL that such expectations will prove to be correct.
WHL does not undertake any obligation to publicly update or revise any of the
information given in this announcement that may be deemed to be forward-looking.
DISCLAIMERS
The release, publication or distribution of this announcement in certain jurisdictions
may be restricted by law and therefore persons in such jurisdictions into which this
announcement is released, published or distributed should inform themselves about
and observe such restrictions.
This announcement is not an offer for the sale of securities. The securities discussed
herein have not been and will not be registered under the US Securities Act of 1933
(the “US Securities Act”), or under any securities laws of any state or other
jurisdiction of the United States and may not be offered, sold, taken up, exercised,
resold, renounced, transferred or delivered, directly or indirectly, within the United
States absent an exemption from, or in a transaction not subject to, the registration
requirements of the US Securities Act and in compliance with any applicable
securities laws of any state or other jurisdiction of the United States. The Company
does not intend to register any part of the Proposed Rights Offer in the United
States.
Date: 09/04/2014 07:05:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of
the information published on SENS. The JSE, their officers, employees and agents accept no liability for (or in respect of) any direct,
indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on,
information disseminated through SENS.
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