Lew Buys 9.9% David Jones Stake in Threat to Takeover

Solomon Lew, an Australian billionaire investor, bought 9.9 percent of David Jones Ltd., threatening a $2 billion bid by South Africa’s Woolworths Holdings Ltd.

Lew, a billionaire former board member of Reserve Bank of Australia, spent about A$209 million ($195 million) buying 53 million shares in the Australian department store chain between May 9 and June 16, according to a regulatory statement today. The offer by Cape Town-based Woolworths needs the votes of 75 percent of David Jones shareholders attending a June 30 meeting to go ahead.

“With that amount of skin in the game he certainly has a seat at the table,” Evan Lucas, a market strategist at IG Ltd., said by phone from Melbourne. “He is incredibly savvy at doing this. He has got a very definite endgame and somehow he will get it.”

Lew has blocked Woolworths from taking full control of Australian apparel store Country Road Ltd. since 1997 through a stake of about 12 percent held by his company Australian Retail Investments. He hasn’t disclosed his intentions regarding David Jones since the Sydney-based department store disclosed Lew held a 0.65 percent stake May 30.

The shares were picked up at an average price of A$3.95, according to a calculation by Bloomberg. David Jones gained 0.5 percent to A$3.90 as of the market close in Sydney, below the A$4 offer from Woolworths.

Premier Scenario

Woolworths has noted Lew’s shareholding, the company said today in an e-mailed statement. “We believe our offer remains very compelling for David Jones shareholders,” it said. Woolworths Holdings Ltd. isn’t related to Woolworths Ltd., the supermarket chain that’s Australia’s biggest retailer.

“If he has some views we would be delighted to hear them,” Simon Mawhinney, a portfolio manager at Allan Gray Australia Pty., said by phone from Sydney. “Maybe he’s just buying at A$3.88 so he can sell for A$4? That’s quite a reasonable thing to do.”

Lauren Thompson, a spokeswoman for Lew, declined to comment on his investment.

Several major investors have cut their stakes in the company ahead of the planned shareholder meeting. Allan Gray has recently “significantly reduced” its holdings by selling in the region of A$3.95, Mawhinney said. It wasn’t worth holding out for the A$4 sale price given deal costs, the length of time before cashing out, and the risk of a deal failing, he said.

Game Played

The company was David Jones’s sixth-largest shareholder with 4.99 percent of the company as of Feb. 21, according to data compiled by Bloomberg.

Ausbil Dexia Ltd., the fifth-largest shareholder with a 5.1 percent stake as of Sept. 30, also sold out in recent weeks for the same reason, Chief Executive Officer Paul Xiradis said by phone.

“There’s a game being played” by Lew, he said. “I’m sure it’s to the benefit of himself.”

Premier Investments, the fashion and stationery group that counts Lew as chairman and 42 percent shareholder, had A$222 million of net cash at the end of January, according to data compiled by Bloomberg.

“If all of a sudden he puts Premier in the game, there’s your 25 percent,” Lucas of IG said, noting that the current stake is held via Lew’s personal associates. “The issue is judging what Solomon Lew is going to do. Only he knows that.”