e endured more than enough in the past two years, including the distraction of the hoax takeover two years ago. At the time Inside Retail PREMIUM went to print, Lew had outlayed $13.82 million for a 0.65 per cent stake in David Jones, but he has a cash war chest of around $300 million which would allow him to buy more than 10 per cent if he can find willing sellers. Around 10 per cent of David Jones shares have recently changed hands, but it is not known at this stage to what extent the transactions may be aligned with Lew’s plans. Motives Market speculation is that Lew wants to acquire between 10 and 15 per cent of David Jones’ shares ahead of the June 30 meeting in a bid to scuttle the Woolworths takeover offer. While Lew would be unlikely to sway many shareholders at the meeting to vote against the Woolworths bid, he could stop the deal because Woolworths has declared it will only proceed if it can acquire all of the issued shares in the retailer. Woolworths is adamant about securing all issued shares after enduring Lew’s incessant criticism of its management and the trading performance of Country Road. Lew holds a strategic minority shareholding in Country Road and has refused to sell his scrip to Woolworths despite his misgivings about the management, governance and performance of the retail chain that has, interestingly, substantially outpointed his own Premier Retail (Just Group) portfolio for years. Lew’s entry into the fray in the David Jones takeover caught the industry by surprise, with most expecting that, if he had any genuine interest, he would make a counter bid for the department store chain, rather than a spoiling shareholding that could seriously disadvantage existing shareholders. There are some market observers who believe Lew could be attempting to buy time to develop an alternative play for David Jones and, possibly even revisit the Myer merger option. Another more Machiavellian explanation would be an offer by Lew to hand over his newly bought David Jones shares to Woolworths in exchange for a deal that would allow him to buy Country Road or to buy him out at a more handsome price than has previously been on offer. Past comes back to haunt Lew’s management team at Just Group includes former senior executives from both David Jones and Myer, including former David Jones CEO, Mark McInnes, and there has been speculation in the past two years that the billionaire investor might launch a takeover bid for one of the two department store chains. Lew and the market were caught off guard by Woolworths April bid of $4 a share for David Jones, a bid which torpedoed a Myer merger proposal first put to the David Jones directors in October of last year. The Woolworths $4 a share offer for David Jones represents a handsome premium on prevailing share prices in April and values it at $2.15 billion. Woolworths has its funds in place and has no other constraints to its bid should David Jones shareholders tick off the deal at the end of this month, given there are no other formal counter bids for the retailer. Lew has his war chest, but would need to dig much deeper if he was to mount a counter bid. Woolworths is an all-cash bid, unlike the Myer merger plan, which had lukewarm shareholder support. Lew would be unlikely to enthuse David Jones shareholders with a cash and scrip offer so he would need to line up debt funding for a formal takeover, a process that would need time to put together and would be somewhat questionable on the maths, given that a counter offer would require a premium to the Woolworths $4 a share bid. Woolworths’ bid was calculated on synergies that could be achieved through the creation of the second largest department store retailer in the southern hemisphere with sales of around $5.7 billion from 1151 stores across 16 countries. Around 43 per cent of the sales for Woolworths post-acquisition of David Jones would be generated in Australia and New Zealand. The synergies and operational scale that underpin the Woolworths bid would not be available to Lew. The consensus The financial market consensus is that Lew’s share purchases are about mischief and spoiling the Woolworths bid rather than a counter offer, at least, in the short term. Lew apparently started buying David Jones shares around May 9 through private companies, including SL Nominees, rather than through his listed vehicle, Premier Investments. There is speculation that via his own holdings and allies, Lew could already muster close to 10 per cent of David Jones’ shares to allow him to challenge Woolworths on its 100 per cent of the company or nothing edict. The problem with Lew’s actions are that he is apparently not yet at the point where he must disclose his intentions on his David Jones share purchases, but the uncertainty has left the market at a loss to understand what may transpire and how existing shareholders, staff, suppliers, and customers of the retailer could be impacted. One would hope his intentions are honourable and not simply spite and an extravagant play to niggle an old adversary, just because Lew can.