EB Private Equity abandons David Jones takeover bid
Little-known UK-based investor EB Private Equity has withdrawn its takeover bid for David Jones, Australia’s second-largest department store chain. The group initially submitted an offer of A$1.52 billion ($1.55 billion) in May and later increased it to A$1.65 billion but has now informed David Jones that publicity surrounding the deal has made it difficult to proceed.
The retailer said in a statement to the Australian Stock Exchange that its board received an incomplete expression of interest from EB in late May and sought public information on the firm, but found nothing meaningful. Deciding that the value indicated also significantly undervalued David Jones, the board declined to proceed further. EB responded with a higher offer in late June, after which the story leaked and the private equity firm backed off.
EB's website describes the firm as a Luxembourg and UK real estate and real estate-related investor, developer and private equity partner, focused on the US, Asia and Africa.
John Edgar, the firm's chairman, earlier told the Australian Financial Review that the offer for David Jones "stacks up both on a technical level and practical level." He added that EB had $200 million of funds under management and had reached out to financial institutions and other investors about participating in the deal.
According to David Jones, the proposed deal structure would have seen an EB-led consortium provide A$850 million in equity, while a syndicate of banks and investment institutions put up A$450 million, and a further A$450 million came in residual equity for existing shareholders, a portion of which would be underwritten.
Shares in David Jones rose 15% on Friday to A$2.59, but this was still well below the offer price of A$3.12 per share, reflecting skepticism about the deal going through. As of Tuesday morning, the stock was trading at A$2.35.
David Jones is down 40% on a one-year basis and is currently trading at a price-to-earnings ratio of 8.33, well short of levels seen in 2007. This predicament is not uncommon among listed Australian companies, and private equity firms have responded by launching take-private deals. Pacific Equity Partners recently acquired cleaning and catering contractor Spotless in this manner, while TPG Capital was pursuing beleaguered sportswear chain Billabong.
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