Weird DJs dalliance to get minds ticking

The strange affair of the unsolicited approach from an unknown and unincorporated UK entity to David Jones has ended as abruptly and as weirdly as it developed.
David Jones said today that EB Private Equity (which the Fairfax papers have discovered operates out of a building in Newcastle, England, located between a wig shop and a noodle bar rather than the glitzy towers usually inhabited by private equity firms) had informed it via a letter this afternoon that it had decided to withdraw the proposal after the publicity it had generated made it difficult to proceed.

What little is known about EBPE suggests David Jones was correct in being cautious about the approach last week and making it clear that because there was none of the usual publicly available information available that it didn't have enough information to assess the approach. It revealed the approaches, which apparently date back to May, only when it became clear they were about to be reported on.

David Jones' second statement, in which it provided details of the approach – a $1.65 billion offer which included $850 million of equity provided by a consortium and involved David Jones' shareholders holding $450 million of residual equity – was made because the department store group became aware that an obscure UK blog site, which is said to have promoted the story aggressively to news agencies last Thursday evening, had named EBPE.

Whatever the reality or otherwise of EBPE's standing and motivation, or the actions and motivation of the blogger, the David Jones board did try to ensure the market was properly informed to the best of its ability, which was limited by the circumstances. It was clear from Friday's statements that there was some scepticism within the company about EBPE's bona fides.

The Australian Securities and Investments Commission will inevitably look at what occurred last week and the trading in David Jones shares that saw its share price spike before it retreated today as more information about the group's aspiring suitor became available.

The larger point made by the affair, however, will linger. There had already been speculation that the department store operator's poor trading performance within a very difficult retail environment and its depressed share price could lead to a private equity bid, or an assault from Solomon Lew's Premier Investments.

The EBPE approach highlighted the rationale for such speculation – David Jones' ownership of four of the best retail property sites in the country, its flagship stores in Sydney and Melbourne. A bid for David Jones would be more of a property play than a retail play.

The curious EBPE affair and the attention it has generated will have ensured that a lot of files on David Jones held by private equity firms and other retailers around the globe were dusted off over the weekend in order to run the numbers on a tilt at the group, with a particular focus on the value of those properties.

With the withdrawal of EBPE's "proposal" David Jones may not be quite in play. However, if it was vulnerable before the events of the past few days it is probably even more vulnerable after them.