Myer’s $1b tie-up with Premier Investments fashion brands deemed ‘fair and reasonable’

Myer’s independent expert has declared the department store’s $1 billion bid for retail magnate Solomon Lew’s suite of fashion brands as “fair and reasonable”, with shareholders urged to vote in favour of the deal.

If backed by both sets of shareholders, the combination will see Myer issue 890.5 million new shares to Mr Lew’s Premier Investments to fund the purchase of its Apparel Brands, which includes Just Jeans, Jay Jays, Jacqui E, Portmans and Dotti.

Premier will also pay $82 million to Myer.

Myer on Tuesday issued an explanatory memorandum that concluded the combination was fair and reasonable to non-associated Myer shareholders like Premier, which currently holds a 32 per cent stake in the department store.

Consultants from Kroll valued Apparel Brands in a range of between $848.3m and to $946.3m.

The value of the shares due to be issued falls within a range of between $823.7m and $1.1 billion.

In her letter to shareholders, Myer executive chair Olivia Wirth said the combination was transformational for the department store, highlighting a range of reasons why the deal was compelling for shareholders.

Ms Wirth said the deal would create a leading omni-channel retail group with 783 stores in Australia and New Zealand and 17,300 staff, with “a large and highly engaged customer base, and a stronger balance sheet to fund future investment and growth”.

The tie-up was also expected to generate annual pre‑tax earnings benefits of at least $30m on a run‑rate basis over the short to medium term; introduce Premier’s customers to Myer’s loyalty program Myer One; and delivered an enhanced balance sheet and greater capacity to invest in growth.

The new combined group is expected to generate more than $4 billion in annual sales.

Myer’s independent directors have unanimously recommended shareholders vote in favour of the deal at a meeting scheduled for January 23.

“In summary, the Myer independent directors view the combination as compelling and in the best interest of Myer shareholders,” Ms Wirth said, adding the directors considered a range of disadvantages and risks associated with the deal.

This included Myer shares trading below the current price.

Once the deal is finalised, Mr Lew will return to Myer’s board as a non-executive director and emerge as the department store’s biggest shareholder with a 26.8 per cent stake.

In a booklet to shareholders, Premier’s board also unanimously recommended its shareholders vote in favour of the proposed deal.

Premier the same day moved to reassure investors rattled by the publication of leaked internal documents purportedly painting a miserable sales picture for two of its flagship brands — Peter Alexander and Smiggle.

The publication of the figures comes as both brands battle to gain a foothold in the potentially lucrative UK retail market.

The documents, published by The Australian, show sales at Premier’s first three Peter Alexander sleepwear stores are trading almost 62 per cent below budget targets. One store in East London was as much as 78.5 per cent under target.

Overall, sales at three stores had reached only £443,437 of the £1.15 million target

Sales at UK stores of Premier’s popular kids stationery outlet Smiggle were also down 12.2 per cent between August and last weekend, compared to a year earlier, the newspaper reported. Sales came in at £22.19m, down 18.8 per cent on budget.

The documents also pointed to grim sales in Australia, with Premier’s other shopping centre mainstay brands, including those under the Apparel Brands umbrella, also failing to meet budget targets. They also signalled a wages blowout.

But in a statement issued to the Australian Securities Exchange on Tuesday, Premier said it “cautions investors about relying on such information”.

“It is necessarily selective and incomplete and does not present a full financial picture of the group’s performance or position, which is not possible at this point — especially given the ongoing structural shift in retail shopping patterns,” it said.

Premier said the figures did not include the key trading periods of Christmas, Boxing Day, January, and back-to-school sales which “remain critical to the company’s first-half FY2025 results”

Blue Ocean Equities senior research analyst James Tracey said reporting in other media suggested Peter Alexander’s launch in Britain had been “disastrous” when it was far too early to tell.

“The article’s assertion that these stores are unprofitable is unlikely to be surprising to management or anyone with experience of retailers entering new markets,” he said in an investor note.

“Company budgets are not relevant at this immature stage of the business.”