djs predator defends 'genuine' bid

http://www.theaustralian.com.au/business/mergers-acquisitions/djs-predator-defends-genuine-bid/story-fn91vdzj-1226413851238

THE European private equity company planning a $1.65 billion bid for David Jones claims it is a genuine operation and keen to pursue its indicative offer, despite being "taken aback" by the retailer's decision to reveal the early talks to the market.

EB Private Equity revealed it first approached the David Jones board via a letter of intent on May 22 with an initial offer of $1.52bn. The retailer on Friday informed the ASX of a second "unsolicited approach" that was made, valuing David Jones at $1.65bn.

The news sent the retailer's shares soaring 14 per cent, the highest point in more than three months.

EB chairman John Edgar said the group did not expect the potential bid to be made public after the initial approaches.

"We didn't anticipate such a fuss," Mr Edgar told The Australian from London. "It has come as quite a surprise for us. We are quite taken aback by it. But that's how the market works."

Mr Edgar said he would seek a phone hook-up with David Jones chairman Bob Savage this week.

"We think our bid is a good bid. It works on a technical and practical level," he said. "We have put a lot of work into it and would like to engage further."

It is understood the David Jones board made the contentious disclosure decision because the second letter contained more information about the offer.

Its hand was also forced by a Britain-based party leaking the existence of the offer to the Australian media.

Investor concerns have been raised about the lack of public visibility of EB, described as Britain and Luxembourg based.

EB's website showed only cursory details and only included a post office box address.

Mr Edgar described EB as a property-oriented fund with five years' experience of deals in Europe, Africa and North America. He cited one recent deal as the $US70 million purchase of an office and mixed-use complex in Kenya.

"We haven't attempted to be mysterious; that's the way it was portrayed," he said. But he added there were many such funds which flew below the public radar. "I would say we are one of the more private funds out there."

Mr Edgar also rejected reports the firm's website was a cut-and-paste version of another property investment company's site.

Mr Edgar said EB's interest in David Jones focused on the retailer's property portfolio, valued at a minimum $600m, rather than the retail business.

A David Jones spokeswoman last night said the company had contacted EB for details on funding, the structure of the offer and the organisation itself.

"We are awaiting a response," she said.



According to EB, the funding would comprise $850m of equity provided by the consortium, $450m of borrowings and $450m of "residual equities for the existing David Jones shareholders".

On Friday, DJs executive director Stephen Goddard told the ASX that "no details of EB's financial capacity, its management or any of the terms of the residual equity have been made available".

Deutsche analyst Michael Simotas said there were questions over the structure of a potential deal. "Will existing holders be offered a stake in an unlisted vehicle? Or is the plan for the business to remain listed with a 25 per cent free float? Who will underwrite this investment?"

It is believed the company would not remain publicly listed.

Credit Suisse analysts dubbed the offer as "not particularly attractive", bringing "nothing to the table other than a desire to increase David Jones' gearing".