The fight for board control of department store Myer will be decided in the next few months, with the firm’s AGM likely to run in late October, but Solomon Lew’s major stake in the business could well be diluted by the time to vote.
According to multiple media reports over the last week Myer has been approached by investors looking to buy up its online business and loyalty program, which the department store may use to raise capital and issue more shares – a move which could put Lew on the back foot once it comes time to vote on a new board.
Myer has said the media speculation is “nonsense” and that it has no immediate plans to issue shares, but Lew, by way of Premier Investments’ legal council Jeremy Leibler, said Premier will take “all steps within its power to prevent any attempt to dilute and disempower” its holding in the business.
“Premier is astounded that Myer and its board are wasting corporate resources exploring ways to dilute Premier instead of fixing Myer’s chronic and prolonged underperformance,” Leibler wrote in a letter to Myer’s legal representative Rory Moriarty at Clayton Ulz.
“[And] can only interpret Myer’s steps to seek a capital raising as a bad faith attempt by Myer to stifle Premier’s advocacy for changes to Myer’s board.”
According to Leibler, a capital raising in the form articles in the AFR and SMH outline, and which Myer rejects will come to pass, would be a breach of each Myer director’s duty to act in good faith and would constitute “oppresive conduct”.
Lew has publicly said he isn’t interested in a full board takeover of the department store, though the letter said Premier reserves its rights to make an application to the Takeovers Panel or seek court orders to prevent such a capital raising from coming to pass.
Department store sales up this year
On Thursday morning Myer released its unaudited trading update – something requested last week by Lew – and said it expects to return to “second half” profitability for the first time since FY17.
Total sales for the FY21 year are expected to land at $2.6 million, up 5.5 per cent on the same period of last year, while online sales rose 27.7 per cent to $539 million.
A total net profit result is expected to land between $47 and $50 million for the year, compared to Myer’s disastrous FY20 result of a net loss of $13.4 million.
“Our Customer First Strategy continues to gain momentum, delivering a significantly improved full year profit result, despite the ongoing Covid impacts in FY21,” said chief executive John King.