On the table since October last year, David Jones is now showing signs of considering a merger proposal with rival department store Myer, following a recent boardroom shake-up.
The Australian Financial Review reports that David Jones will engage Myer over the next two weeks, but is currently still of the opinion that the proposal – as it was tabled in October last year – doesn’t correctly value the David Jones business.
“The company is not against a merger as long as it’s on the right terms – it always comes down to price,” a source from Myer said.
The $3 billion merger proposal apparently had Myer’s shares originally valued at 1.06 for every David Jones share. Now, investors are currently pricing the offer at 1.3 Myer shares – totalling $1.8 billion of the overall agreement.
“It’s not a merger of equals, it’s a takeover, and in any takeover they have to pay a premium,” another source explained. “What we can bring to the table is very valuable and that should be fully recognised in the value.”
Looking more closely at the proposal, it appears that both companies have positives and negatives to offer. Myer, while owning twice as many outlets as David Jones, also reportedly has a higher level of debt. However, David Jones may consider Myer’s fulfilment and digital marketing capabilities of benefit in further bulking out its own omnichannel strategy, which shareholders say has already outpaced Myer’s.
With David Jones’ online sales now accounting for two percent of the total and on the verge of profitability, this element of the retail business may be a major bargaining chip in ongoing merger discussions.