Woolies's Australian standoff ends
Woolworths has offered to buy Solomon Lew out of Country Road at a massive premium.
SYDNEY - Australian billionaire Solomon Lew effectively ended a 17-year standoff with South Africa's Woolworths Holdings Ltd on Tuesday with a deal that will have the department store firm buy him out of two investments at a massive profit.
With a A$200 million ($188 million) gamble, Lew positioned himself to block the South African firm's A$2.2 billion takeover of Australian rival David Jones Ltd by amassing almost 10 percent of the target's stock in little more than two weeks.
The David Jones gambit gave Lew a huge bargaining chip to negotiate an exit from another Australian investment, clothes retailer Country Road Ltd, in which he held an 11.88 percent stake alongside controlling shareholder Woolworths.
Woolworths on Tuesday offered to buy Lew out of Country Road at a massive premium of A$17 a share, handing the Melbourne-based businessman a A$188 million profit and removing his implied threat to the David Jones takeover.
Lew bought the Country Road shares for about A$2.00 each in 1997 in a successful effort to frustrate Woolworths's attempted takeover of that company. And he bought his David Jones shares for an average A$3.90 each, compared to Woolworths's A$4.00 offer price.
If he accepts Woolworths's A$213 million offer for his Country Road stake, worth just A$59 million in January, and sells into its David Jones offer, Lew will not just pocket a tidy profit but prove once more he is one of Australia's wiliest and most patient investors.
"He had them where he wanted them and if they wanted David Jones they had to pay up," said Lonsec senior client adviser Michael Heffernan.
Neither Woolworths nor Lew would comment on the Woolworths offer for the Country Road shares. Woolworths said in a statement to the Australian Securities Exchange only that it hoped to reap "synergy benefits" from owning all of Country Road and David Jones.
"In light of the proposed acquisition of David Jones, this is a common sense and timely opportunity to seek to reach full ownership of Country Road," Woolworths Chief Executive Officer Ian Moir said in the statement.
A spokesman for Lew could not be reached for comment and Lew's listed retail investing business, Premier Investments Ltd , made no comment on its David Jones share raid other than a 26 May regulatory filing to say it had bought the shares.