Myer to investors: Don’t let Premier take control “on the cheap”
In a media release distributed on Thursday, Myer said that Premier Investments is currently prevented from making a takeover bid due to its executive chairman Solomon Lew’s comments on ABC’s The Business broadcast on Wednesday night.
In an interview with Elysse Morgan, Lew said that Premier Investments, Myer’s largest shareholder and the owner of The Just Group, Peter Alexander and Smiggle, had “no interest in making a takeover bid” and at this point in time is “definitely not buying any shares”.
Myer noted that under ASIC’s Truth in Takeovers policy, Premier is now prevented from making a takeover bid and will continue to be prevented from doing so while this policy applies.
The only way Premier could gain control of the department store is through a board spill, which Myer urged investors not to fall for.
“One can only assume that Premier is trying to take control of Myer under the guise of seeking an ‘independent board’,” Myer chairman Garry Hounsell said in a statement.
“Myer shareholders should be alarmed that Premier is trying to get Myer on the cheap for their own benefit. This interview confirmed the board’s fears and all shareholders should be deeply concerned.”
Hounsell said that if Lew wanted to take control of the Myer, he should do so by paying shareholders a control premium.
Lew has been lambasting Myer’s leadership and agitating for a board spill in letters to investors and statements to the media for months.
On Friday, November 19, he called for shareholders to deliver a second strike, which would result in a board spill, at the retailer’s annual general meeting on November 30, following the revelation that Myer’s sales dropped 4.8 per cent drop year-on-year in the first quarter of fiscal 2019.
“A sales drop of 4.8 per cent (nearly $1 in every $20 of sales disappearing) is something that even Father Christmas can’t turn around… The failed Myer board must go,” Lew said in a statement at the time.
Some analysts, however, have suggested the figures are not all that alarming.
Citi analyst Bryan Raymond said they were indicative of the softer trading conditions across the industry in September and October.
“Myer has been clear they are willing to sacrifice sales to improve profitability,” Raymond added.
The upcoming holiday period will be Myer’s first real test of its ability to avoid discounting through the numerous key sale events, he said.
Hounsell alluded to the negative impact of Lew’s campaign against the retailer while it is in the midst of a turnaround during the busiest time of the year.
“As we approach our important Christmas trading period, it is critical that we apply 100 per cent of our focus and energy on our customers. It is for this reason that we are extremely disappointed by the actions of Premier Investments and their ongoing hostile media campaign, which impacts negatively on customers, team members and, ultimately, on our shareholders,” he said.
At the time of this writing, Myer’s shares were trading at $0.40, a near year-to-date low.
Citi is forecasting an uncertain outlook for Myer in FY19 and expects the business to breach covenants by the second half of FY20, as earnings continue to decline.
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