Retail heavyweight Solomon Lew stands to make more than $200 million by standing in the way of David Jones’ takeover by a South African retailer.
Dubbed “Lew’s Coup” by one analyst, the clothing industry veteran appears to have been successful in taking a major stake in David Jones in order to earn a healthy price for his interest in Country Road.
South Africa’s Woolworths Holdings is the target of Mr Lew’s high stakes game, as the controlling shareholder in Country Road and the company bidding $2.2 billion for control of David Jones.
Mr Lew recently spent $209 million building up a 9.89 per cent stake in David Jones, enough to destabilise and potentially block Woolworths’ department store chain takeover.
Analysts believed Mr Lew was seeking a generous offer from Woolworths to end their often rocky Country Road association, which began 17 years ago when Mr Lew bought into the retailer to stop Woolworths taking full control.
That offer came on Tuesday, with Woolworths willing to pay a generous $17 for each remaining Country Road share.
That stands to net Mr Lew $209 million for his 11.9 stake – well above its most recent market value of $172 million, and the $41,500 it was worth just seven months ago.
Mr Lew is yet to indicate whether he will accept the offer.
But in a rare move, Woolworths will only pay out Mr Lew for full control of Country Road if its David Jones takeover gets the green light from the department store’s shareholders.
“It’s unusual to see a condition like that,” CMC Markets chief analyst Michael McCarthy said.
“That points to the fact that Mr Lew got leverage out of his DJs stake to resolve the Country Road situation.
“This has been some very smart play.”
David Jones shareholders are due to vote on the Woolworths takeover on July 14, although that could be delayed for a second time if there are complications with the Country Road deal.
Concerns have been raised about so-called “collateral benefits” regulations, which prevent inducements being offered to some shareholders in a takeover deal, but not others.
But Mr McCarthy believes the deals have been carefully crafted to avoid legal challenges.
David Jones shares were up 16 cents, or 4.2 per cent, at $3.95 by 1415 AEST, indicating investors now expect its takeover to go ahead, Mr McCarthy said.
Country Road will be removed from the share market if Woolworths take complete ownership.