ASIC throws its weight around
The Australian Securities and Investments Commission (ASIC) is a curious organisation at the best of times, but it has certainly surprised everyone with its intervention in the Woolworths takeover of David Jones.
ASIC, the corporate policeman, is notoriously slow to issue speeding tickets, let alone march companies and individuals off to court whose conduct fleeces shareholders, suppliers, and customers of millions of dollars.
Take for instance its inaction on the Allied Brands and Kleenmaid collapses, or even the failure of Retail Adventures in 2012.
In spite of this, it has raced off to the Federal Court this week to attempt an intervention in the Woolworths/David Jones/Solomon Lew saga, which is headed to a showdown at a David Jones shareholders meeting on July 14.
But the Federal Court has rebuffed ASIC’s attempt to force a review of Woolworths’ parallel bid to mop up the minority shareholdings in Country Road, which are largely accounted for by Lew.
ASIC argues that the Country Road premium offer of $17 a share, around four times the price last January, provides Lew with a benefit that is not available to other shareholders in the $2.2 billion David Jones takeover.
The Country Road bid, which emerged only after Lew began accumulating a sizeable shareholding in David Jones last month, has been widely interpreted as providing a financial incentive for Lew to abandon any spoiling attempt on the $4 a share bid for the department store chain.
Whether it is an incentive or not, ASIC was drawing a long bow in trying to assert that shareholders in David Jones might be entitled to some additional compensation based on Lew’s potential pay day at Country Road.
The attempted court intervention smacks of frustration at ASIC and the Australian Stock Exchange about Lew’s ability to amass his personal stake in David Jones and, reportedly, to form alliances with other shareholders under current disclosure rules.
Despite the potential detriment of Lew’s actions to longstanding David Jones shareholders and the distinct possibility that they will not again see the pay day offered by Woolworths if Lew were to succeed in voting down the takeover bid, he has not had to provide any explanation of his intentions in buying into the retailer in the weeks leading up to the shareholder vote.
Woolworths, David Jones shareholders, the regulators, and the market are also none the wiser approaching July 14 about exactly how close Lew may be to controlling, through alliances with other shareholders, the 25 per cent threshold that would torpedo Woolworths’ bid.
The ‘collateral benefit’ evaluation that ASIC sought to secure through its action in the Federal Court this week is a tenuous proposition in legal terms, as Country Road and David Jones are two quite distinct entities, notwithstanding that Woolworths has calculated its synergy benefits for the David Jones takeover by incorporating Country Road operations.
David Jones shareholders would not be disadvantaged by the Country Road minority shareholdings mop up at the significant premium proposed.
The Country Road mop up exercise would, in fact, change the maths and reduce the synergy benefits for Woolworths.
The Federal Court ruled that a letter from Grant Samuel, the independent expert for the David Jones takeover bid, provided sufficient information on matters pertinent to the takeover that had occurred subsequent to the issue of Woolworths documents detailing the bid to shareholders ahead of the July 14 meeting.
This article first appeared in Inside Retail PREMIUM issue 2005.
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