Anchorage buys Australian department store chain David Jones

The size of the transaction was not disclosed, but local media previously reported that the valuation could reach AUD 125m (USD 85m). It does not include the company’s flagship property asset – its store on Bourke Street in Melbourne – which will be leased to David Jones on a long-term basis on market-related terms, according to a filing.

WHL said the divestment would materially improve group-level return on capital by removing from its balance sheet ZAR 17bn (USD 998m) in liabilities relating to the David Jones store portfolio. Having acquired the business in 2014, WHL struggled to realise its full potential, leading to a series of losses that were exacerbated by COVID-19.

The company said in its 2022 annual report that the lifting of lockdown restrictions in Australia prompted a strong rebound for David Jones and its other local asset, Country Road Group. They delivered “double-digit profit growth on a normalised basis, notwithstanding ongoing space reduction initiatives and in-store footfall still some c.20% below pre-COVID levels.”

Last year, WHL Group CEO Roy Bagattini told the Australian Financial Review that David Jones wasn’t a good fit for the company. He noted that “businesses are increasingly required to be locally relevant” and that David Jones fundamentally differs from WHL’s core strategy of selling own-branded goods. Attempts to introduce South African brands like RE: Denim to David Jones failed.

Announcing the sale to Anchorage, Bagattini said that the “strategic rationale at the time of the acquisition did not materialise to the extent originally envisaged.” He added that WHL would focus on its South African retail interests, which operate under the Woolworths brand, and on Country Road, a speciality fashion retailer known for brands such as Mimco, Politix, and Witchery.

Founded in 1838, David Jones is not only Australia’s oldest department store but also the oldest department store in the world still trading under its original name. The company has 43 outlets and two distribution centres across Australia and New Zealand and describes itself as a premium omnichannel retailer with a rapidly growing e-commerce business.

Anchorage, a specialist turnaround investor, highlighted David Jones’ history, brand value, and assets, as well as the efforts that have gone into making the business profitable, cash-generative, and self-funding. It will work with management on the next phase of the company’s transformation.

“This transaction aligns with Anchorage’s investment strategy and its successful track record of executing complex carve-outs. We look forward to leveraging our deep industry expertise, hands-on approach with management, and continued investment to drive key initiatives to grow the business and deliver sustainable future performance,” an Anchorage spokesperson said in a statement.

The private equity firm recently launched its fourth fund, which has a target of AUD 500m – up from AUD 360m in the previous vintage – and will invest Australasian companies with enterprise valuations between AUD 100m and AUD 350m. This followed the first exit from Fund III with the sale of rolling stock leasing company Rail First Asset Management for AUD 425m.

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• Topics
• Australasia
• Consumer
• Buyouts
• Australia
• Anchorage Capital Partners