David Jones Says It Rejected Myer Merger Offer in October

David Jones Ltd., Australia’s second-largest listed department store company, said it rejected an offer to merge by larger rival Myer Holdings Ltd., which made the approach in October.

There are no talks currently between the two companies, David Jones said in a regulatory filing late yesterday. Myer offered 1.06 of its shares for each David Jones share, according to the statement. The offer on Oct. 28 involved zero premium and didn’t represent sufficient value, Sydney-based David Jones said.

“The execution and implementation of any such transaction would have substantial commercial, market, business and regulatory risks,” David Jones said.

The proposal came in the same month Paul Zahra announced he would quit as chief executive officer of David Jones, citing personal reasons. At the time, the stock had dropped 37 percent from when he took over on June 18, 2010, compared with a 21 percent fall in Myer.

Two David Jones directors bought shares in David Jones on Oct. 29 last year, a day after the proposal from Myer, according to regulatory filings. The Australian Securities and Investments Commission said in a statement today it had considered the issue and decided to take no further action.

“ASIC has investigated the David Jones matter and has considered thoroughly all relevant information, including the conditional proposal, and decided to take no further action,” spokesman Andre Khoury said in an e-mailed statement.

Merger Synergies

Amanda Buckley, a spokeswoman for Myer, didn’t immediately respond to calls made outside of regular office hours. David Jones spokeswoman Helen Karlis also didn’t immediately respond to calls.

David Jones fell 0.7 percent to A$2.87 in Sydney trading yesterday, while Myer dropped 2.3 percent.

David Jones said it made the statement in response to a report yesterday in the Australian Financial Review speculating that Myer could approach the company with an offer of 1.4 shares for each of its stock.

The synergies of a merger would be “significant and obvious” at around A$90 million, Morgan Stanley analysts Thomas Kierath and Crystal Wang said in a research note today. “The Australian department stores now compete more with others than just with each other,” including Inditex SA’s Zara, Arcadia Group Plc’s Topshop and online operators.

Australian retail sales, boosted by low interest rates, rose at almost twice the pace economists forecast in November, climbing 0.7 percent, a government report showed Jan. 9. The central bank is trying to rebalance the economy away from mining regions in the north and west as investment wanes, and stimulate growth in manufacturing, residential construction and retail in the south and east.

— With assistance by Keith Gosman

Before it's here, it's on the Bloomberg Terminal.