Woolworths inks deal to sell entire stake in David Jones in Australia
Retailer Woolworths says it has reached a deal to sell its more than 180-year old David Jones business in Australia, which will remove nearly R17 billion in related liabilities from its balance sheet.
David Jones Woolworths has inked a deal to sell its David Jones business, which is the world's oldest department store still operating under its original name.The proceeds of the sale are yet to be determined, but the firm says it will realise value from it.Woolworths has struggled since acquiring David Jones in 2014, but says its turnaround efforts have borne fruit.For more stories, go to the News24 Business front page.Retailer Woolworths has inked a deal to sell its entire stake in David Jones, Australia's oldest continuously operating department store chain, a move it says will improve its returns profile and remove R17 billion in related liabilities.The sale to Australian private equity fund Anchorage Capital Partners is expected to be complete by the end of March 2023, Woolworths said in a statement, with the final proceeds yet to be determined.During a conference call on Monday, CEO Roy Bagattini said the firm would realise value from the sale of the business, but declined to go into details, saying it was a complex transaction with a number of moving parts, but "absolutely positive for us". "It wasn't that long ago that people were saying to me just give it away, just walk, close the door, and hand back the keys," he said. There would be no writedowns related to the sale, said Bagattini, adding that Australia remained an attractive market. The group sees its Country Road business becoming a more important part of the group.While David Jones was now was cash-generative and profitable after extensive restructuring, it still wasn't a fit for Woolworths, said Bagatinni."The structural economics are somewhat fragile here, this business needs extensive amounts of investment going forward, not only in its store portfolio but also in terms of its online business and its back-end system capabilities. "That capital just doesn't work for us, that sort of investment."We can as management invest our time and effort and wherewithal in businesses that really make a difference to our group."In 2014, Woolworths paid about R21.4 billion to buy David Jones, which is more than 180 years old, but had struggled with debt and its performance. It has recently been moving to cut its store space in order to improve cost controls and trading densities, as well as renegotiate leases.Earlier this year, The Australian reported that the retailer was in talks with banks to sell David Jones, while Bloomberg reported on Friday that a deal worth R1.6 billion was near completion.Woolworths said it had concluded David Jones was "no longer aligned with the strategic objectives of the group", and has previously indicated a sale was possible. This sale comes despite recent improved performance of the business as it bounced back from Covid-19 lockdown restrictions, with the firm saying recently that sales at David Jones jumped more than half in the 20 weeks to 13 November. In its 2022 year, David Jones only contributed about 4% of the group's R5 billion in pre-tax profits Newsletter Daily SA Money Daily The biggest business, economic and market news of the day. Sign up
Woolworths said on Monday that under the terms of the deal it will retain ownership of the flagship property 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."This is a major milestone in the repositioning of Woolworths for growth, while simultaneously improving return on capital for our shareholders," Bagattini said."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." We live in a world where facts and fiction get blurred In times of uncertainty you need journalism you can trust. For 14 free days, you can have access to a world of in-depth analyses, investigative journalism, top opinions and a range of features. Journalism strengthens democracy. Invest in the future today. Thereafter you will be billed R75 per month. You can cancel anytime and if you cancel within 14 days you won't be billed.