Things are about to get more interesting with the David Jones Limited (ASX: DJS) takeover bid from South African department store company Woolworths Holdings Limited (Johannesburg: WHL). What at first was seen as a masterstroke out of nowhere to snag one of Australia's leading department stores is getting mired down in financial intrigue.
What could happen if the takeover fails? How should investors be looking at the situation, and is buying David Jones shares wise?
We now know that Solomon Lew, chairman of Premier Investments Limited (ASX: PMV), has privately been amassing David Jones shares. With a 10% stake potentially under his influence, he may try to block the bid, make his own offer or try to get some board control.
Takeover offer block
If you didn't own David Jones shares before the takeover announcement, then buying them now is very dicey. If the takeover is scuttled or complicated so as to draw the process out, the stock could sink or even fall to the pre-bid price. Not much upside there.
Two-way bidding
Lew, a deeply experienced retail businessman and billionaire, may lob his own takeover offer in once he has a sufficient stake. How much over the $4 a share bid would he go? Again, buying shares now in David Jones may not yield you a great premium, but expose you to the downside if that bid or Woolworths' bid gets cruelled in some way.
Get control, settle a score
Like a Game of Thrones episode, this could be just for political maneuvering and power grabbing. Having a seat or several in any new David Jones board would give Lew strong influence to bargain. This may be fun to watch play out, but only from the sidelines for investors. Waiting for the battlefield to clear and see which side is victorious is the better choice for now. If David Jones shares do fall back to where they were before, then this story needs to be revisited.
