Eswatini Daily News

David Jones sale to relieve Woolworths from E17 billion worth liabilities

By Bahle Gama

The Woolworths Group is hoping to offset E17 billion worth of liabilities through the sale of its Australian department store chain, David Jones.

In a statement, Woolworths Holdings Limited (WHL) announced on Monday that the sale of the store chain was because it intends to prioritize its core operations in South Africa and the sale is being made to Anchorage Capital Partners.

The Group stated that it expected the final proceeds of the sale to exceed its current carrying value of David Jones Assets. According to Australian local media and Bloomberg, the deal between the two companies is
worth over E1.5 billion (around A$130 million).

“As part of the transaction, WHL will retain ownership of the flagship property asset 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 [WHL],” it said.

The agreement according to the group is subject to terms and conditions customary for transactions of this nature and it anticipates the transaction to be complete by the end of March 2023, with the final proceeds to be determined based on completion accounts to be prepared in due course according to the agreement.

“The transaction will materially improve the group’s return on capital by further transforming its balance sheet through the removal of circa E17 billion in liabilities relating to the David Jones store portfolio. Importantly, this also enables the reallocation of capital and management focus towards value-accretive initiatives across other areas of the group.”

According to reports, the group and the Australian brand have been together for almost a decade, having merged in 2014 in a deal worth A$2.15 billion. In that duration, challenges have been faced, including David Jones making losses for most of those years that have resulted in the sale.

The group has further reported that its struggles with the brand grew with the advent of the Covid-19 pandemic, which in turn hiked the chain’s bigger losses and Woolworths made efforts to turn its Australian business around by cutting down on losses significantly in the last two years.

The Group reported that the strategic rationale at the time of the acquisition did not materialize to the extent originally envisaged.

“While David Jones has successfully executed 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.”

In the statement, an unidentified Anchorage Capital Partners spokesperson stated that David Jones had a storied history, immense brand value, and unparalleled assets, including an attractive retail footprint, a loyal customer base, and dedicated employees.

“We look forward to working closely with CEO Scott Fyfe and the talented David Jones management team on the next phase of its transformation.”

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