The purchase of David Jones by Woolworths South Africa has been the talk of the town. Add the intrigue of Solomon Lew buying into DJs and theories abound. The email has been running hot from South African journalists asking for my views, and they have posed questions, a few of which I detail below together with my answers. QUESTION: Why has Solomon Lew bought a stake in David Jones? ANSWER: This is the million dollar question. His tiny stake of 0.65 per cent is not going to give him much
clout, but for some reason he took pains to cover his tracks when he bought in.
He stands to make $175,000 if he sells (he paid $3.95 and the going price is $4), but I don’t see this as a reason. He is a very wealthy man (estimated wealth $1.7 billion) and $175,000 is not worth him getting out of bed for.
It is unlikely that he ever considered blocking the sale with such a small shareholding, but he is pushing for a 10c increase in the price, which would hurt Woolies. He may simply be wanting to leverage his stake in Country Road in exchange for not making waves at David Jones. Then again, who knows his real stake in DJs. He could own much more than we think, and there are rumours of seven per cent being the real number.
Q: Do you have a sense of his agenda?
A: It could be that he just wants to be a thorn in the side of Woolies and Ian Moir, but this is unlikely. Sol is a very strategic and patient man and likes making money. As mentioned, he probably has an ulterior motive with regards to his stake in Country Road or pushing the price of DJ shares up. If he owns more than we think, this could provide a tidy profit at $4.10 a share.
Q: Why has there been such an acrimonious relationship between Woolworths and Lew?
A: Solomon Lew tried to buy Country Road in the 90s. He lost out to Woolworths and since then has been a minority shareholder (about 12 per cent with Woolworths owning most of the rest). Woolies has wanted to delist Country Road, but Sol has blocked that and Woolies has refused to buy him out – a real stalemate. He was especially critical of Moir when he was running Country Road. There is no love lost, and Sol is pretty vocal when he sees things are not right. And there is a lot not right at DJs.
Comments:
Every journalist has his or her take on this saga, so there is bound to be continuing controversy and speculation.
Jared Dickson wrote a column on June 6 in Inside Retail PREMIUM stating that Lew owes the market an explanation of his motives and intentions, because David Jones shareholders have endured more than enough in the past two years, including the distraction of the hoax takeover two years ago.
While I have a great respect for Jared, my response is: “Sol owes DJ shareholders nothing”
Stuart Bennie is a retail consultant at Impact Retailing and can be contacted at stuart@impactretailing.com.au or 0414 631 702.
