David Jones is ripe for takeover

Angus Whitley, David Fickling
Herald Sun
May 22, 2012

David Jones is vulnerable as its share price wallows, industry experts say.

DAVID Jones is emerging as a takeover candidate as its shares wallow at their weakest level since the financial crisis, industry experts say.

According to an analysis by global finance group Bank of America, the retailer’s property portfolio is worth almost as much as the company, making it a plum buyout candidate.

Shares in the high-end department store group have tumbled about 50 per cent over the past year.

The share price fell late last week to its lowest level in more than three years – and its lowest level in eight years relative to the value of David Jones’ assets.

While the slump has pushed David Jones market value down to $1.2 billion, its real-estate holdings would be worth as much as $1 billion if sold and leased back, according to Bank of America.

Commonwealth Bank analysts say it is a prime time for would-be buyers to run the ruler over David Jones, given the Reserve Bank is cutting interest rates in a move likely to stimulate spending.

Robert Penaloza, head of equities at fund manager Aberdeen Asset Management, said the group’s real-estate portfolio was “something tangible that investors can hold on to when there’s capitulation in the market”.

“The company still has a decent brand name and its positioning in the market is still valid,” he said.
On Friday, David Jones shares slipped to $2.20 – the lowest point since March 2009 and just 1.4 times the value of its assets less its liabilities.

The group’s shares jumped almost 2 per cent yesterday to $2.23.

David Jones owns four major retail sites – its facing stores on the Bourke Street Mall and two in central Sydney.

Melbourne is the eighth most expensive city for retail rents – ahead of centres including Milan, Frankfurt and Chicago. Sydney is the third-most expensive city, according to CBRE research, behind New York and Hong Kong.

Commonwealth Bank analyst Andrew McLennan said a potential buyer of David Jones would need to lower prices, invest in technology and expand its online business.Bloomberg