The Premier Investments Limited (ASX: PMV) share price is up 16% after announcing a deal to sell its apparel brands to Myer Holdings Ltd (ASX: MYR).
Myer to buy apparel brands
Premier Investments announced to the ASX that Myer is going to buy Just Jeans, Jay Jays, Portmans, Dotti and Jacqui E in exchange for 890.5 million new Myer shares to Premier Investments.
The 890.5 million Myer shares to be issued to Premier represent 51.5% of Myer’s enlarged share base.
Premier will then distribute its existing and new shareholding of Myer to Premier shareholders. Each eligible Premier shareholder will receive approximately 7.2 Myer shares per Premier share. As part of the announcement, the company said Solomon Lew will join the board of Myer, in addition to his role as the chair of Premier.
In FY24, apparel brands delivered $791 million of revenue, and $76 million of underlying EBIT.
Peter Alexander and Smiggle will remain under the ownership of Premier Investments and it will continue to own its stake of Breville Group Ltd (ASX: BRG). Premier Investments will also own its property assets.
The company said Peter Alexander and Smiggle each have significant identified local and international growth opportunities. I think they could help Premier Investments shares deliver good long-term returns.
What about Myer?
After the transaction, Myer said it would have $4 billion revenue and $152 million of underlying EBIT based on FY24’s numbers.
Myer said it would be able to benefit from significantly enhanced scale to extract growth and operating leverage benefits.
Myer said it’s expecting to generate ‘combination benefits’ of at least $30 million per year, over the short to medium term, across a range of areas.
Timetable
Both Premier Investments and Myer shareholders will need to approve this transaction before it can go ahead. Shareholder meetings are aimed to be held in late January 2025.
Final thoughts on the Premier Investments share price
This seems like a smart move that works for both sides.
Premier Investments’ Smiggle and Peter Alexander both have excellent potential, in my opinion. I’d be happy to buy a few Premier Investments shares today for the long-term potential, though buying yesterday would have been better.
This transaction could also help Myer’s growth and profit, so it seems very positive for the department store business.
I’d put Premier Investments up there as one of the more promising larger ASX growth shares.
