MYER has delivered a better-than-expected $1.4 billion bounty to Coles Myer, in a deal securing the Myer family a stake in its 106-year-old heirloom with partner Newbridge Capital.
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Coles Myer made a $700 million profit on the much-speculated sale of Australia’s largest department store chain, freeing up the retailer to focus on its bigger supermarkets business.
Coles Myer chairman Rick Allert yesterday said the high price tag also raised the possibility of a share buyback, an option the Coles board would consider.
The sale follows a seven-month review of the 61 underperforming Myer stores, which analysts had tipped to fetch a total of about $1 billion.
The deal includes the flagship Bourke St store in Melbourne, despite speculation that it may be sold separately, and the Myer name will remain.
Coles Myer shares surged more than 5 per cent to close up 52c at $10.49.
Shaw Stockbroking analyst Scott Marshall said Coles now had the funds to narrow the gap over its main grocery rival, Wool-worths, and competition in the already keenly fought sector would likely intensify.
As for Myer, he said the group would likely head more upmarket, nipping at the heels of rival David Jones.
The Myer family will have a stake of up to 10 per cent in the new ownership structure led by Newbridge, the private equity firm whose parent company Texas Pacific owns the British department store Debenhams.
The Myer Family Company has a stake of about 4 per cent in Coles Myer, which was formed in 1985 through the merger of Myer and GJ Coles and Coy.
Russian immigrant Sidney Myer opened the first Myer store in Bendigo in 1900 with his brother.
His grandson David Schelmerdine said yesterday’s deal represented an important investment for the family, which will have a representative on the Myer board and play a “minor role” in its future.
“It gives us the opportunity to retain an interest in the department store business in Australia,” he said.
Newbridge Australian head Ben Gray said the firm would review the Myer business over the next few months and planned to keep the chain’s existing portfolio.
“As we go through the process, we’ll evaluate the business and evaluate what changes we think need to be made,” Mr Gray said.
Myer managing director Dawn Robertson will leave the role once the sale is completed, it was also announced.
