SYDNEY Australia's No.2 department store operator, David Jones Ltd DJS.AX, said on Wednesday it had agreed to a takeover offer from South Africa's Woolworth Holdings Ltd (WHLJ.J) valuing the company at around A$2.15 billion ($2 billion).
In doing so, it has spurned an offer from bigger rival Myer Holdings Ltd (MYR.AX), which in October 2013 proposed a nil premium all-stock deal that had valued David Jones at A$1.4 billion.
David Jones said it had entered into a scheme of arrangement with Woolworths, a mid to high-end retailer in South Africa, for the A$4 per share bid. That represents a 25 percent premium to its closing price on Tuesday and a 40 percent premium to its close on January30 when the Myer offer was made public.
"All I can say is that it's a surprise and it's a hefty premium," said Morningstar senior equity analyst Tim Montague-Jones.
"I don't think Myer will be able to match that sort of premium, but who knows - it's hard to tell," he said.
David Jones rejected the Myer proposal last year, but had since included it in a number of options under consideration.
David Jones Chairman Gordon Cairns said the board had considered several proposals including remaining a standalone company or merging with Myer but concluded that the Woolworths' deal was in the best interests of shareholders.
The South Africa-based Woolworths also owns 87.9 percent of Australia's clothing and homeware store Country Road Ltd CTY.AX.
($1 = 1.0712 Australian Dollars)
(Reporting by Lincoln Feast and Maggie Lu Yueyang; Editing by Edwina Gibbs)