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Ian Moir on the R23bn David Jones acquisition

Discusses what the acquisition means for Woolworths, David Jones and Country Road.

RYK VAN NIEKERK: The Australian courts today approved Woolworths takeover of the Australian retailer, David Jones and this concludes a rather eventful acquisition of more than R23bn. On the line now is Ian Moir, chief executive of Woolworths.

Ian, you must be relieved that this deal is in the bag.

IAN MOIR: Oh yes, we’re relieved and excited, I guess now the work starts and indeed it started over the past couple of days with a very large team that’s working through how we get to our first 100 day plan. So its exciting times, the court case went the way we expected and wanted it to so a very momentous day for us.

RYK VAN NIEKERK: But it’s a very big deal for Woolworths. Your market cap is about R69bn and this transaction is R23bn…that is close to a third. How much of your revenue will now come from Australia…

IAN MOIR: Over time you’re going to get our revenue close to 42%/43% coming out of Australia but there are going to be opportunities…we’ll be taking brands from there into here and brands from South Africa into Australia. This creates a very different business from the Woollies that was and certainly if you look at the shareholder support that we got at the vote for the acquisition, it was well over 95%. And if you look at how our share has traded post the announcement, it’s gone up very nicely. Again indicating a lot of support from our shareholders for this acquisition.

RYK VAN NIEKERK: David Jones is a bit under pressure, especially from online retailers. How do you foresee turning this business around?

IAN MOIR: We reckon we’ll spend a long time going into a great deal of detail as to what we can do and how we can do it. We think that there is a lot of opportunity to take what we’ve already done both in Woolworths and in Country Road around things like Private Label, brands, around online retailing, around customer relationship marketing, drop it into David Jones and have a very significant and positive impact in a relatively short space of time.

RYK VAN NIEKERK: A lot was made about Solomon Lew’s conduct. He bought 10% of David Jones and there was even talk that he could block the deal. Did you anticipate for him to get involved?

IAN MOIR: We thought there was a possibility and amongst many others you don’t really know what Solomon Lew is going to do, but I guess exiting from the Country Road business at this point of time makes sense for him. The price he got was a very fair price, but why we’re excited is that we now have a wholly owned subsidiary in David Jones and we will have a wholly owned subsidiary in Country Road and we’re able to bring our business together as one group, benefit from all these synergies, benefit from all the economies of scale and do so far more quickly than if we’d been encumbered by a minority interest and all of the corporate governance requirements that go around that minority.

RYK VAN NIEKERK: Was it media hype or is there some friction between you and Solomon Lew personally?

IAN MOIR: I’ve never met the man and…it’s difficult to say that there’s bad blood between us. Our relationship has only ever been at a professional level and the relationship between the businesses or his ownership over the last four or five years, we’ve had very little contact with Solomon Lew.

RYK VAN NIEKERK: You will now have two subsidiaries in Australia, David Jones and Country Road. I assume you will delist those businesses…are you considering listing Woolworths in Australia…?

IAN MOIR: No we haven’t discussed that…a few people have asked us whether we’ll go for the dual listing or whether we’ll move…we see Woolworths as very much a South African business, head quartered in South Africa and listed on the JSE. So there have been no discussion either by myself, our advisers or our board around dual listing or separate listings.

RYK VAN NIEKERK: Woolworths also put up some pretty pedestrian sales numbers today. Group sales up 14.4% and comparable sales up 9.1%…this must be an indication of the difficult trading conditions in the South African environment.

IAN MOIR: Pedestrian is a bit rude…it was above market and if you look at our clothing figures it’s not far removed from our first half and our foods trading was better than anybody else in the marketplace. So to be trading above double digits is not a bad position to be in. And don’t forget particularly with foods, we’re up against a last year that was very strong indeed and if you look at our clothing, those sales were achieved on much lower markdowns than the prior year as we cut back on markdown and didn’t participate in promotional activities that others were. So those sales were more profitable. So we’re actually taking market share on a three months, six months, 12 months basis in clothing, on a three months, six months, 12 month basis in foods and we’re very happy with the returns we’re getting in both of those businesses. So I don’t think you could realistically describe them as pedestrian and by no means is the performance in South Africa the reason that we’re launching into Australia, we can grow our South African business, our Australian business and our African business at the same time, and certainly even after the deal we’ll have the capital necessary to allow us to do so.

RYK VAN NIEKERK: How does the local sales or retail environment compare to the current environment in Australia?

IAN MOIR: The environment in Australia has been more subdued but it’s getting better. I would say probably the reverse and I think it’s more subdued, the cutback in unsecured lending has had its impact. There is a little more negativity and concern in this market place than what you would see in the Australian market place, so it’s been a tougher market in Australia, getting better…and in South Africa it’s an easier market but getting a little tougher. But as I said within the Woollies…customer still seem to be responding well and is still resilient and we’re still getting double digit growth and there are not many other places in the world that are getting double digit growth right now.

RYK VAN NIEKERK: Thank you Ian…that was Ian Moir, chief executive of Woolworths.

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