Woolworths in bid to buy out Lew's stake in Country Road

South Africa's Woolworths lobs $17 per share offer in bid to win support for its $2.2bn David Jones deal.

South Africa's Woolworths has lobbed an all-cash takeover bid for clothing retailer Country Road at a price of $17 per share, a 21.4% premium to the group's closing share price yesterday.

Woolworths said it already had a relevant interest in 87.88% of Country Road shares and that its offer had a total value of around $213 million.

The bid comes as Woolworths tries to overcome hurdles with its $2.2 billion takeover of David Jones after retail billionaire Solomon Lew bought a strategic stake in the department store chain.

Woolworths said it plans to fund the offer through new debt facilities to be raised in Australia.

The offer is conditional on Woolworths' scheme of arrangement takeover of David Jones becoming effective and approval from the Foreign Investment Review Board.

In response to the announcement, David Jones said only that the bid for Country Road would not impact the shareholder meeting to vote on the Woolworths proposal, scheduled to take place on July 14.

Mr Lew's motives have generated much speculation since revealing he had amassed a 9.89% stake in David Jones.

Analysts suggested he may have been trying to block the Woolworths takeover of David Jones in order to get the South African retailer to buy his 12% stake in Country Road.

Calculations by Business Spectator estimate Mr Lew's stake -- via his company Australian Retail Investments -- would total $210 million under the terms of the deal proposed by Woolworths.

With speculation swirling that he may also have a hold on a further 5% of David Jones via derivative contracts, Lew may already be in a position to block Woolworths’ $2.2 billion agreed bid for the department store group.

Woolworths said achieving full ownwership of Country Road was a logical next step from its proposed bid for David Jones and noted the synergy benefits of such an outcome.

The group also said the deal would fulfill its longstanding desire to acquire 100% of Country Road.

A previous attempt by Woolworths to buy Country Road in 1997 failed after Mr Lew bought a stake in the clothing retailer.

"The consideration Woolowrths is prepared to offer Country Road’s minority shareholders has been determined having regard to the value of Country Road taking into account its financial performance and outlook, including previously announced growth initiatives, combined with the future benefits that are expected to accrue as a result of the acquisition and integration of David Jones into the Woolworths group and the benefits derived from owning 100% of Country Road," the statemwnt said.

Country Road said its directors, other than representatives of Woolworths, will consider the proposal and update shareholders in due course.

Rothschild and Standard Bank are acting as financial advisers to Woolworths, while Gilbert Tobin and Webber Wentzel are acting as legal advisers.