SYDNEY (Reuters) — Shareholders of David Jones Ltd, Australia’s second-biggest department store by sales, on Monday backed a $2 billion bid by South Africa’s Woolworths Holdings Ltd, ending weeks of uncertainty over the intentions of David Jones’ second-largest shareholder Solomon Lew.

The takeover gives David Jones the financial firepower to ramp up its online offerings and in-store label, while helping Woolworths become a major global player with annual sales approaching $5.6 billion.

“We believe David Jones as an Australian icon will be better able to compete,” David Jones chairman Gordon Cairns told about 500 shareholders at a meeting to vote on the scheme in Sydney. 


David Jones said 96.8 percent of shareholders had voted in favor of the deal at a special meeting on Monday. The vote ends a long-running feud between Woolworths and Lew, who emerged as David Jones’s largest shareholder with a 9.89 percent stake just before the vote. Lew, a Melbourne-based billionaire, abstained from Monday’s vote, meaning his votes were automatically redirected in favor of the deal.

A spokeswoman for Lew declined to comment.  


The 2.15 billion Australian dollar, or $2 billion at current exchange offer, means shareholders will receive four Australian dollars, or $3.8, per share next month. David Jones shares closed Monday up 1.3 percent or five cents at 3.98 Australian dollars, or $3.74, per share.

 

“From a pure market perspective it’s a very good deal for shareholders — 25 times earnings. It’s a good solid premium and much better than the price they got before the deal” said IG market strategist Evan Lucas. “The question now is whether David Jones will remain as David Jones. But there’s no way that they’re going to destroy the brand quality that is David Jones and the premium that comes with that. That’s another issue that’s been raised, but it’s unlikely that Woolworths is going to change that at all because they want the David Jones brand, they don’t want to get rid of it.”

 

The outcome is still subject to ratification at the Federal Court on Thursday — at which the Australian Securities and Investments Commission has not ruled out making a second intervention. 

A veteran of Australian clothes retailing, Lew had prevented Woolworths from taking full ownership of another Australian clothes company, Country Road Ltd, for 17 years by keeping his 11.88 percent stake.

On June 24, Woolworths Holdings, which owns nearly 88 percent of mid market Australian retailer Country Road, had offered to buy out Lew’s 11.8 percent Country Road stake for 17 Australian dollars per share, or $16, on the condition that the Jones offer proceed.

The Country Road deal raised concerns at the corporate watchdog, the Australian Securities and Investments Commission (ASIC), about whether Woolworths had in effect offered Lew an inappropriate inducement to accept its David Jones bid. So far no wrongdoing has been found but ASIC may again raise objections when final approval for the takeover goes before the courts on Thursday.

 

Reuters contributed to this report.

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