Woolworths finally sells David Jones

JSE-listed retail giant Woolworths Holdings Limited (WHL) on Monday confirmed the sale of its Australian department store chain David Jones in a Sens announcement, as it looks to prioritise is core South African operations.

It did not immediately reveal the value of the deal with Anchorage Capital Partners, however, local media in Australia and Bloomberg have reported that deal to be worth around A$130 million (just over R1.5 billion).

Woolworths, however, did note that the sale will at least relieve the group of R17 billion worth of liabilities tied to the David Jones brand.

The group added that it expects the final proceeds of the sale to exceed its current carrying value of David Jones assets.

“WHL is pleased to announce that the group has entered into an agreement to sell its entire shareholding
in its Australian subsidiary David Jones to Anchorage Capital Partners, an Australian private equity fund,” its Sens noted.

“As part of the transaction WHL will retain ownership of the flagship property asset in Bourke Street, Melbourne, which will be leased to David Jones on a long-term basis on market-related terms. A transitional services agreement will remain in place for a period of time to ensure an orderly separation of David Jones from the group [WHL],” it said.

“The agreement is subject to terms and conditions customary for transactions of this nature, and WHL anticipates the transaction to complete by the end of March 2023, with the final proceeds to be determined based on completion accounts to be prepared in due course pursuant to the agreement,” Woolworths added.

“The transaction will materially improve the return on capital of the group by further transforming its balance sheet through the removal of circa R17 billion in liabilities relating to the David Jones store portfolio,” it said.

“Importantly, this also enables the reallocation of capital and management focus towards value- accretive initiatives across other areas of the group.”

The South African retailer’s journey with the Australian brand of stores comes to an end almost a decade after
tying the knot in 2014, in a deal worth around A$2.15 billion at the time.

Since then, the marriage has been marked by several challenges including David Jones making losses for most
of those years.

Woolworths’s struggles with the brand peaked with the advent of the Covid-19 pandemic, which plunged Australia’s oldest department store chain into bigger losses. The SA retailer did make efforts to turn its Australian business around in the last two years, cutting down on losses significantly.

“This is a major milestone in the repositioning of Woolworths for growth, while simultaneously improving return on capital for our shareholders,” Woolworths CEO Roy Bagattini said in a statement on Monday.

“The strategic rationale at the time of the acquisition did not materialise to the extent originally
envisaged.”

“While David Jones has successfully executed on its turnaround, notwithstanding the Covid-19 disruptions, now is the right time for the business to operate under new ownership, while Woolworths refocuses on its core South African and Australian Country Road Group businesses,” he added.

Commenting on the deal in the same statement, an unidentified Anchorage Capital Partners spokesperson said: “David Jones has a storied history, immense brand value and unparalleled assets―including an attractive retail footprint, a loyal customer base, and dedicated employees.”

“We look forward to working closely with CEO Scott Fyfe and the talented David Jones management team on
the next phase of its transformation.”