The Myer Holdings Ltd (ASX: MYR) share price is up more than 1% after its vote on whether to buy Dotti, Just Jeans, Jay Jays and other apparel retailers from Premier Investments Ltd (ASX: PMV).
Owners of Myer shares vote
The department store retailer Myer held an extraordinary general meeting (EGM) in Melbourne today on whether to buy the apparel brands business from Premier Investments.
That includes Dotti, Just Jeans, Jay Jays, Portmans and Jacqui E.
The chair of the business said this is one of the “most significant transactions in the company’s history”, suggesting it would enable Myer to fast-track its strategic priorities by leveraging the complementary strengths of both businesses to help increase profitability and drive sustainable earnings growth.
Chair Olivia Wirth then said the strategic vision of the business is to create a “leading Australian retail platform, by identifying opportunities to deliver a step-change in Myer’s market position and generate substantial strategic and financial benefits”.
The Myer shareholders seem overwhelmingly positive on the idea, with 95.45% votes for the idea and only 3.82% votes against the idea.
The Myer board has declared a fully franked pre-completion dividend of 2.5 cents per share to existing Myer shareholders, conditional on the deal going ahead.
What are the benefits of a tie-up?
The independent Myer directors noted a number of positives about this transaction going ahead:
- It creates a business with significantly enhanced scale and capabilities to drive growth and boost profit margins
- It introduces new customers to Myer’s loyalty program
- The combination should generate a pre-tax annual earnings boost of least $30 million on annualised basis.
- It boosts the balance sheet capacity to invest in growth across the larger business
- It produces opportunities for Myer to take advantage of the apparel business’ capabilities in product development, design, sourcing and distribution to deliver improved profit margins for Myer
Final thoughts on the Myer share price
This seems like a useful addition for Myer, but it will be up to its management to try to extract the value and grow overall profit. We’ll see how successful Myer is at doing that.
For now, I’d rather invest in ASX retailer shares that have more growth potential, such as online or ones expanding internationally.
