If Solly Lew was offering cash for Just Group its shareholders might have to think about it - but only because the market is bombing out, retail spending is waning and Just shares are fetching a tad under the Premier Investments offer.
But Lew is not offering cash. Most of the $4.10 pitch involves Premier scrip, which is illiquid and boasts the wily Melbourne businessman as the controlling shareholder.
A few weeks ago we took the view that Premier's offer for Just was the most unblushingly low-ball bid of the modern era.
Just's target statement and rejection this week confirms this view. Its "independent expert" report from Lonergan Edwards prices the retailer at $4.78 to $5.28, with a mid-point of $5.03.
This reflects a 2009 EBIT multiple of 9.2-10 times, which racks up against the takeout of Colorado at 12.5 times where Lew got a handy premium for his shareholder activist efforts.
Even Archer Capital's mop-up of Rebel was done at 11 times - and even then the institutions were crying "highway robbery". The PE multiple was 12.4 to 13.6 times.
On Premier's offer range of $3.97 to $4.23 - with a mid-point $4.10 - Just will say the discount of 93c, or 18.5 per cent, is way out of the park.
Independent experts, of course, can be relied upon to deliver the valuation goods. Still, Just ended trading yesterday at $3.81, well below the Premier offer level, which suggests two things: things are bad in retail land, and the Premier offer will not succeed.
As no rival suitor has appeared and Lew is famous for his patience and tenacity, this takeover battle has a way to go. The usual "he said, she said" rhetoric will continue apace.
The Lew camp has been sprinkling gloom and doom utterances. In late April the media line was that Portmans and Jacqui E chains were recording year-on-year drops of 10 per cent to 25 per cent.
But Just said on Monday that its figures showed Portmans down 5 per cent in this half while Jacqui E was up 5.1 per cent since the bid was announced. Like for like, sales in these two chains were up 1.5 per cent and 7.3 per cent respectively, and up 7.3 per cent and 8.8 per cent on a total sales basis.
The reality was embarrassing for Premier, but you would not have known it from the spin: "Premier is disappointed with the trading results for Just Group in the second half of FY2008."
Perhaps the disappointment arose from the reasonably positive numbers or from the likelihood Premier may have to pitch a realistic price.
The bottom line is that Just has been a good little retailer and Premier is offering a mid-point price of $4.10 - to be paid largely in illiquid scrip - which represents a PE of not much more than 10 times next year's earnings. This is below the trading multiples of a large number of other specialty retailers including Pumpkin Patch (11.6 times), the Reject Shop (13 times) and JB Hi Fi (15.2 times).
The Premier offer has been open for more than two weeks and the Premier camp is yet to record a single acceptance. The awful market conditions could mean that Lew may yet get his hands on Just if he was to increase his offer, or pay cash.
Private equity has dried up, thanks to the scarcity of credit, and to a point that restricts Just from conducting a decent auction.
In the mean time, and for the benefit of Just shareholders, this offer is hardly going to divert management from focusing on the business.
