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Solomon Lew Winner in David Jones $2 Billion Takeover

 Lew may be walking away with a significant arbitrage profit on his David Jones shares,  and an escape from a long held 11.8% blocking position in Country Road.


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At a special meeting of shareholders today, Australian retailer David Jones Limited overwhelmingly approved the scheme of arrangement whereby it will be acquired by South African retailer Woolworth Holdings Limited.

The $2 billion takeover proposal was passed by the requisite majorities of shareholders. Close to 90% of David Jones shareholders were represented at the meeting, either in person or by proxy, and almost 97% of the votes cast were in favor of the scheme.

The threshold for approval of such an arrangement scheme is just 75%, provided at least 50% of shares are represented at a meeting, which is a good deal lower than the 90% required for a force-out under tender offer rules. So Woolworth Holding will now be very happy with the result. So, too, will be Solomon Lew, who recently also made it to number sixteen on the Business Review Weekly’s Rich 200 list for 2014, and whose family net worth is estimated by BRW to be about $1.8 billion (A$2 billion).

After out-maneuvering Woolworth Holdings in the takeover battle for David Jones (See also: Solomon Lew’s $209 Million Country Road Windfall Unlocks Woolworths Takeover Of David Jones), Lew now appears to be walking away with both a possibly significant arbitrage profit on his David Jones shares, and an escape from a long held 11.8% blocking position in Country Road.

Country Road is another Australian retailer Woolworths acquired control of, back in 1997, and until now had been resigned to leaving Lew stuck with his position in a Mexican standoff that really satisfied neither one of them. At least Woolworths clearly learned something from that experience, and for their new bid for David Jones proceeded by way of a proposed scheme of arrangement, with its lower voting threshold requirement this time around.

Even so, Lew still ended up making a timely intervention in the Woolworths Holdings bid for David Jones, picking up a substantial near 10% holding recently. Then, by maintaining ambiguous possible intentions as to possible further steps, in association with possible other risk arbitrageurs as well, which could potentially have been merger blocking, this encouraged Woolworths Holdings to separately, and independently, offer to buy out all the outstanding minority holdings in Country Road as well.

This is likely to result in a big profit for Lew, thought to be around seven or eight times what he originally paid for them, unadjusted for holding costs in the sixteen years since.

Indeed, some David Jones shareholders complained a bit at the shareholders meeting today, with Bloomberg even quoting Stephen Mayne, a spokesman for the Australian Shareholders’ Association, who attended the meeting, as saying, “Clearly Solomon Lew is being treated differently, ” adding, “He’s getting a windfall in an unrelated transaction.”

Lew is reported to have himself actually formally abstained from today’s vote, with his votes automatically, therefore, being cast in favor by the scrutinizers, which is perhaps a neat way to seem to be impartial but still get the benefit of a positive result.

The scheme and the takeover now goe to the Australian courts for final approval, with a hearing scheduled for this Thursday, July 17. From his point of view, at the meeting today David Jones chairman Gordon Cairns probably correctly stated, “The Country Road discussions are actually a sideshow.”

The court is not a rubber stamp, but is likely to agree with him, one can readily conjecture.



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