ELIZABETH KNIGHT June 30, 2012
Dressed to impress: The offer for David Jones is generous, but is it real? Photo: Janie Barrett
ON THURSDAY afternoon David Jones chairman Bob Savage received an email that would set the rest of the board and the senior management on a forensic investigation like no other. It was sent by a virtually unknown venture capital group, EB Private Equity, signed by its chairman and with a proposition to buy the grand dame of Australian department store retailing for $1.65 billion.
While the David Jones share price immediately gained 20 per cent - given the offer price equates to $3.12 a share (against its pre-announcement price of around $2.30) there are plenty of questions that need to be answered about the bidder's bone fides.
If this is a hoax - and it is too early to make that call - it would arguably be the biggest perpetuated in Australia's history
Yesterday David Jones sent a notification to the Australian Stock Exchange - a letter that went as far as it could in telling investors that it should treat the overture with maximum caution.
He described the suitor as a non-incorporated British entity, about which no usual public information was available, adding that David Jones directors did not believe they currently had relevant information to enable them to qualify or value the approach adding that, should this change, they would advise the market accordingly. ''In the meantime the directors recommend that shareholders treat any related market comment cautiously.''
His suspicion is understandable. The blog that revealed the details of the bid was one that has a history of only two weeks. All the postings made over this period (other than the David Jones story) were cut and pastes from other newspapers.
The blog identified advisers to EB Private Equity as well-known property group Jones Lang LaSalle and Chalkhill Partners out of Britain.
The Australian chapter of Jones Lang LaSalle is still trying to establish the group's involvement and Chalkhill's spokesman told BusinessDay last night that he had never heard of EB Equity.
Clearly David Jones has been chasing the same rabbits down the same holes. The EB Private Equity website contains no street address or mention of any board or management names.
David Jones has the name of the supposed chairman but did not release it yesterday. It has an address that it has located as little more than a post office box in Newcastle, north-eastern England. The bidder is located in Luxembourg but Google searches contain no mention of previous deals.
None of this is conclusive evidence that the bid is a fraud. But for those investors that waded into the stock up yesterday, there is a distinct possibility that they could be facing a rude shock in the coming weeks.
Even the structure of the offer is strange. It is based on $850 million of equity provided by the bidding consortium, $450 million of lending provided by a syndicate of banks and investment institutions and $450 million in residual equity for the existing David Jones Ltd shareholders, a portion of this residual equity shall be underwritten.
It is curious that the $1750 million arrived at by adding these numbers comes to more than the bid price. And on my interpretation of the statement, the David Jones shareholders would be required to take equity in this unknown bidding vehicle as part payment for their stock.