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Woolworths $2 Billion Deal Paves Way for Inditex Challenge

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July 14 (Bloomberg) -- Woolworths Holdings Ltd. moved closer to creating a southern hemisphere retail giant after overcoming objections from some David Jones Ltd. shareholders to a A$2.15 billion ($2 billion) takeover.

About 90 percent of shareholders who cast votes at a David Jones meeting in Sydney today supported the offer, above the 75 percent required for the deal to proceed. Billionaire Solomon Lew, who had amassed a stake in the Australian department store chain large enough to potentially block the deal, abstained from voting, Cape Town-based Woolworths said in an e-mailed response to questions.

Some David Jones shareholders expressed concern at today’s meeting they weren’t being treated equally by the suitor. Woolworths last month offered Lew, the company’s largest investor, a record valuation for his stake in another Australian retailer, Country Road Ltd., as long as he didn’t block a takeover of David Jones.

“Clearly Solomon Lew is being treated differently,” said Stephen Mayne, a spokesman for the Australian Shareholders’ Association who attended the meeting. “He’s getting a windfall in an unrelated transaction.”

David Jones shares, which had been suspended for the morning meeting, rose 1.3 percent to A$3.98 at the close in Sydney, just below the $4-a-share Woolworths offer.

Woolworths shares climbed 2.4 percent, the most in two months, to close at 82 rand in Johannesburg. The stock has increased 12 percent since the David Jones offer was announced on April 9.

Shareholder Support

“Woolworths is paying top price for David Jones,” Wayne McCurrie, a fund manager at Momentum Asset Management, said by phone. “You can buy a good company, but if you have paid too much it will put a strain on your shareholders.”

Addressing David Jones shareholders, Chairman Gordon Cairns today described Woolworths’ offer for Country Road as a “sideshow.”

The result “unequivocally demonstrates the overwhelming support among our shareholders” for a sale to Woolworths, Cairns said in a prepared statement read to reporters after the meeting. He declined to take any questions.

Woolworths Chief Executive Officer Ian Moir plans to create a retailer to compete with Inditex SA’s Zara and Hennes & Mauritz AB, better known as H&M, in the southern hemisphere. The combined group would have had about $6 billion in revenue during its 2013 fiscal year, according to data compiled by Bloomberg, giving it greater buying power than Abercrombie & Fitch Co. or Debenhams Plc.

Silent Solomon

Woolworths may now buy Lew’s minority shareholding in Country Road, having offered A$17 a share to add to its existing 87.88 percent holding. Lew hasn’t publicly responded to the offer, which the South African retailer said today remains on the table.

The billionaire, who has blocked Woolworths from taking full control of Country Road since 1997, had assembled a 9.9 percent David Jones stake. The former board member of the Reserve Bank of Australia hasn’t made any statement about his intentions regarding David Jones since the department store revealed he’d bought a 0.65 percent holding May 30.

Lew is seeking to ensure the continuity of contracts such as that held by his Premier Investments company to supply Peter Alexander nightwear to David Jones, Luis Colaco, an analyst at BPI Capital Africa in Cape Town, said June 24. Woolworths will only speak to David Jones suppliers after the deal is scheduled to complete on Aug. 1, it said.

Woolworths Holdings isn’t related to Woolworths Ltd., the supermarket chain that’s Australia’s biggest retailer.

To contact the reporters on this story: Angus Whitley in Sydney at awhitley1@bloomberg.net; Janice Kew in Johannesburg at jkew4@bloomberg.net

To contact the editors responsible for this story: Stephanie Wong at swong139@bloomberg.net Edward Johnson, John Bowker

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