DJS - David Jones

[McLovin]

I hope they double checked that the email came from the official Woolworths SA mailbox.

 

[skc]

I hope they double checked that the email came from the official Woolworths SA mailbox.

Lol. I think they got more than just an email this time.

I might send an email for a higher bid and see if they bite...

 

[McLovin]

DJS has been a takeover target since Miranda Kerr was 16 years old... I just can't really believe that Woolworths SA is willing to pay $4 for it.

It doesn't seem that expensive to me. DJS has no net debt, a property portfolio valued at ~$600m (on the books at $450m). There's some talk of building an apartment tower into the Market St building. So let's say they did a sale+leaseback of their property and using a cap rate of ~7.5% that's $45m off EBIT. So they've paid $1.4b for ~$100m EBIT in a tough retail market with the possibility of getting some kick along from any development of the Market St stores.. I'm sure they've penciled some efficiency gains, the jarps are usually pretty astute deal makers.

 

[skc]

It doesn't seem that expensive to me. DJS has no net debt, a property portfolio valued at ~$600m (on the books at $450m). There's some talk of building an apartment tower into the Market St building. So let's say they did a sale+leaseback of their property and using a cap rate of ~7.5% that's $45m off EBIT. So they've paid $1.4b for ~$100m EBIT in a tough retail market with the possibility of getting some kick along from any development of the Market St stores.. I'm sure they've penciled some efficiency gains, the jarps are usually pretty astute deal makers.

$1.4B for $100 EBIT which is ~$70m NPAT => PE 20. That's a department store in structural decline.

MYR has EBIT of $217m. Market cap is $1.38B + $300m debt. So EV/EBIT = 7.74x. NPAT was $132m so PE ~10x. Stripping the property away, both company faces the same macro operating environment. MYR, having just recently been owned by private equity, may have less scope for efficiency gains.

MYR runs at NPAT/revenue of 5.04%, while DJS is at 3.8% using the sale and lease back assumptions above. So there's a 30% upside for DJS there (without really looking in detail the difference in D&A etc).

Yet they valued DJS at 2x that of MYR. May be it means MYR is undervalued... perhaps they should buy MYR as well and average in.

 

[Ves]

$1.4B for $100 EBIT which is ~$70m NPAT => PE 20. That's a department store in structural decline.

They obviously think that there is more a case for cyclical decline than structural decline with DJS.

For the last 10 years (from 2004-2013) average EBIT was about $180m, adjust for the leaseback I believe that makes it around $135m. Which is close to 10.3x EBIT/EV. Makes more sense if they looked at it in that light and factored in efficiency gains and brand rejuvenation.

 

[skc]

They obviously think that there is more a case for cyclical decline than structural decline with DJS.

For the last 10 years (from 2004-2013) average EBIT was about $180m, adjust for the leaseback I believe that makes it around $135m. Which is close to 10.3x EBIT/EV. Makes more sense if they looked at it in that light and factored in efficiency gains and brand rejuvenation.

Sure. That's pretty much the 30% uplift you get from improving NPAT/turnover to MYR levels. I don't think you can doublecount it again under efficiency gains/brand rejuventation etc.

I guess my point is, even after all the margin uplift (which is not guaranteed), the deal is still some 50% more expensive than the most direct peer. The cyclical vs structural decline thing applies equally to MYR and DJS, so it's a moot point. They will need to make quite a few dollars on the property side just to make up for the gap.

And yes... I am long MYR as a trade so.. Sol Lew, can you please bid for MYR at the same 10x EV/EBIT? Please?!

 

[McLovin]

$1.4B for $100 EBIT which is ~$70m NPAT => PE 20. That's a department store in structural decline.

I disagree they're in a structural decline. They've both been poorly managed, although I think Zahra has been doing a pretty good job. There's been problems at board level at DJS, Zahra resigned then didn't, and don't forget they made an almighty FU when they decided to ditch the internet in 2006.

Yet they valued DJS at 2x that of MYR. May be it means MYR is undervalued... perhaps they should buy MYR as well and average in.

It might. Or it might mean that they don't think they can juice out of MYR what they can from DJS. Your point about MYR having recently being in PE probably was in their mind too. Just looking quickly at DJS balance sheet, it looks like you could pull ~$60-70m out of WC and that would bring it in line with MYR. I'm sure a more detailed look would reveal a few more effciency gains.

Don't get me wrong, it's a really full price but I don't think it's a dud deal for WOWSA (Wowser?)

 

[McLovin]

And just to opine a bit further. I've always thought there was a lot of untapped potential in DJS. I'd like to see it become like a Selfridges in the UK. I also think they could take a leaf out of the M&S Food idea, which is seriously fantastic food for what is basically ready to eat packaged food. To me they just need to think a bit outside the box, yes the market has changed but it's not dead. Australia is a rich country, and the centres of Sydney and Melbourne especially have a lot of people with high disposable incomes + Asian tourists who like to spend. Instead of trying to compete on price go back to what they do well; quality service and upmarket brands.

Plenty of potential, IMO.

 

[tinhat]

quality service

That went out the door a few years ago.

 

[McLovin]

I also think they could take a leaf out of the M&S Food idea, which is seriously fantastic food for what is basically ready to eat packaged food.

Hey someone agrees with me!

Moir said the department store rather than food was Woolworths’ focus in Australia.

However, if they could “do *something with the food offer and food *service offer that creates engagement and excitement” they would, he said.

Moore expects Woolworths will introduce changes into David Jones food halls with a bigger food offering. He says the big opportunity at the David Jones stores for Woolworths is to offer high-quality, ready-to-eat dinner as in Marks & Spencer’s metro stores.

DINNER FOR TWO
Marks & Spencer gives its customers a take-home option of a prepared *dinner for two, with desert and a bottle of wine for £10 ($18).

Moore said it has been *“phenomenally successful”.

“There’s space in Australia for a food offering in the major city centres where people are commuting and they stop into DJs and they pick-up some food on the way home. It will be a time-saving thing for metro shoppers.”

http://www.afr.com/p/business/companies/questions_over_future_of_david_jones_BEhgX6rVB9v9Gm0AeKHzYP

 

[McLovin]

Apparently the properties could be valued at ~$1b once the air rights are included. Woolies SA of course saying they had no knowledge of this before the takeover...Yeah OK.

South African retailer Woolworths has opened the door to selling off David Jones’s $612 million property portfolio to reduce the cost of its $2.15 billion takeover offer.

In a circular to Woolworths shareholders, the food and clothing retailer says it intends to “review alternatives” with respect to David Jones’s freehold property assets once further information becomes available. This represents a subtle change in Woolworths’s position since it unveiled the friendly $4 a share takeover offer in April.

Woolworths chief executive Ian Moir has repeatedly said that Woolworths has no plans for the property assets, which are in the books at $612 million but could be worth as much as $1 billion if air rights above the stores were exploited. Last month Mr Moir denied that Woolworths was considering a sale and leaseback of the four Sydney and Melbourne stores to help pay for the acquisition.

“No, we didn’t look at the properties at all in this transaction,” Mr Moir told journalists. “We’re not property developers, we’re retailers, so in all of the stuff we’ve looked at we’ve really concerned ourselves with how we build this retail business . . . this is not a property transaction, this is a retail transaction,” he said.

http://www.afr.com/p/business/companies/woolworths_opens_door_to_david_jones_JnhuDLsiIJUWQNXtQbQ8CM

 

[skc]

You have to give it to Sol Lew. That is a great poker play. SA Woolworth blinked and now bidding for Country Road.

He's cashing out his Country Road position and he cashes in on his DJS stake.

Shame on those silly hedge funds who sold to Lew when he was acquiring. Shame on me for not reading the situation well enough to benefit as well...

Now I'd like to see some DJS shareholder make an application to the Takeover panel on differential treatment!

 

[VSntchr]

Shame on those silly hedge funds who sold to Lew when he was acquiring. Shame on me for not reading the situation well enough to benefit as well...

Im this morning. I deliberated on DJS at $3.85ish for about a week...and some other poor directional trading led me to be gunshy and ignore a pretty decent probability play. An easy 4% missed!

 

[McLovin]

Ahh...I thought greenmailing was dead!

It's like being in the 80's

 

[skyQuake]

The SMH put it very succinctly

Woolworths would be very aware that the deal cold[sic] get caught by laws that prevent one shareholder of a target company (ie Lew) from gaining a collateral benefit that would induce him to accept the offer.

Read more: http://www.smh.com.au/business/what...oad-revenge-20140624-3apz8.html#ixzz35X5sSr5n

edit: wow first mistake I ever caught in the SMH

 

[skc]

In the meantime, Myer recent "star recruit" turned out to have a falsified CV...

http://www.afr.com/p/business/compa...ecruit_andrew_flanagan_eGxUtQK8CcV8jEHGZngcBO

Department store chain Myer has sacked one of its newest recruits and is considering legal action after what appears to have been an elaborate ruse involving some of the world’s *largest retailers.

Barely a week after trumpeting the appointment of Andrew Flanagan as general manager strategy and business development, Myer has terminated his position after just one day in the job upon discovering that he was not the man he said he was.

And most embrassingly...they found out after being contacted by their competitor.

Myer chief Bernie Brookes was quickly *contacted by the managing director of Inditex Australia, Inigo de Llano, who set the record straight.

What a stuff up!

 

[notting]

Andrew Flanagan as general manager

You never know. He sold himself well. Might have done a great job!

It would be funny if whole point of Sol getting into DJs was to try to draw attention to his own group, in the hope of being taken over too!

 

[System]

On August 5th, 2014, David Jones Limited (DJS) was removed from the ASX's official list following implementation of the scheme of arrangement whereby Vela Investments Pty Ltd acquired all of the Company's issued shares.

 

[Dividend]

Hello, I want to find the historical share price of David Jones. How can I find it?

 

[bigdog]

Hello, I want to find the historical share price of David Jones. How can I find it?

Try this ASX link which goes back to 1997!!

https://www.asxhistoricaldata.com/archive/