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Hold put on David Jones takeover bid

Thursday, June 19 15:04:13

Australian retailer David Jones Ltd has postponed a shareholder vote on a $2 billion takeover bid from South Africa's Woolworths after Australian billionaire Solomon Lew amassed a stake that could scupper the deal.

David Jones, the country's second-largest department store chain, said today the June 30 meeting would be delayed to July 14 to give its board time to "assess the implications" of the retail mogul's stake, which is worth about $188 million.

Lew, who also owns a minority stake in Woolworths' other Australian investment, up-market clothing retailer Country Road, said he had accumulated about 10 percent of David Jones, up from just 0.65 percent as of May 30.

The postponement, which puts the deal in doubt, also gives Lew time to accumulate more shares if he wants them.

Melbourne-based Lew, who has had public spats with Woolworths management over the running and strategic direction of Country Road, has not said why he amassed the stake so quickly.

Investors expect he will use the David Jones stake to force Woolworths to lift its offer and potentially buy him out of Country Road, whose thinly traded shares have tripled in price since the start of the year.

Lew has held his 12 percent stake in Country Road, worth A$170 million, for 17 years, preventing the Cape Town-based Woolworths from taking full ownership and delisting it.

Buying Lew out of Country Road to secure his backing for the David Jones deal may not sit well with some investors, but could allow Woolworths to dislodge what many regard as a thorn in their side.

"What Woolworths don't want is to have a similar situation they have in Country Road, where they have a fairly disruptive minority shareholder on the register," said Roger Tejwani, an analyst at Cape Town-based Noah Capital Markets.

The David Jones deal requires approval from 50 percent of shareholders controlling at least 75 percent of the stock, but only votes cast at the meeting are counted. At regular shareholder meetings David Jones has had turnout as low as 50 percent, meaning Lew could have enough stock to affect the vote. (Reuters)