Investors discount chance of rival DJs bid

Trading in David Jones shares shows that investors have little expectation of a higher bid to trump the rich offer from Woolworths.

Shares in David Jones remained below $4 in opening trade today, suggesting the market has little expectation of a rival bid emerging to trump a $2.15 billion all-cash takeover bid from South African retailer Woolworths Holdings.

DJs is recommending shareholders accept the offer from Woolworths -- which is unrelated to Australian retailer Woolworths Ltd -- which will be executed by a scheme of arrangement on which shareholders will vote at a meeting to be held in June.

While DJs is restricted from soliciting rival offers under a “no shop, no talk” agreement with Woolworths, DJs chairman Gordon Cairns has said the company would assess any other offers it received.

However analysts have said the high multiple being paid by Woolworths, at 24 times analysts’ expectations for full-year earnings, makes a rival bid unlikely.

DJs shares were hovering around $3.93 in morning trade, up slightly from yesterday’s close of $3.91.

Shares in Myer, which yesterday officially withdrew a scrip-based merger proposal for DJs which valued the target company at around $1.3bn, were level with yesterday’s close of $2.36.

Meanwhile analysts at Foster Stockbroking said the deal could be a positive indicator for other Australian listed retailers.

“We believe the bid for DJs reflects positively for domestic retailers which should continue to benefit from an increase in consumer confidence and driven by a stable majority Federal government, the RBA’s outlook for a period of stable low interest rates, weaker currency, and both strong housing and share markets,” the firm said in a note to clients.

“This has been reflected with seven straight months of growth in Australian retail sales since the change of federal government _ a trend which we expect to continue.”

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