Australia’s under-siege retailer Myer has been testing the appetite for a share placement as it steps up its defence against its largest shareholder and corporate nemesis, Solomon Lew, who has plans to overthrow Myer’s board.
Such a targeted equity issue would have the effect of diluting Lew’s 16 per cent stake on the board and shoring up Myer’s current directors.
Potential investors that have spoken with the Myer team have been chosen on the basis of their expertise in various aspects of retail as the department store group looks at the potential of finding some new cornerstone investors who could provide money and expertise.
Myer scours the retail landscape for supporters in battle against Solomon Lew Credit:Liz Main
Speculation that Myer is looking to place 10 per cent of stock to a coterie of new investors was described by a party familiar with the situation as being a potential play, adding that plans could also involve an issue of equity hybrid securities or some kind of structured investment.
Such a deal would also be aimed at addressing Myer’s shortfall in experienced directors as new shareholders may be given the opportunity to join the board.
People familiar with Myer’s fightback against Lew don’t deny that the company has been speaking to potential investors about a placement but say the size of such an issue has not yet been detailed.
But they caution against ruling out other Myer initiatives under investigation including attempts to monetise Myer’s underappreciated assets including its online and loyalty businesses.
Having recently boosted his stake to almost 16 per cent, Lew has begun staging a new offensive against Myer. Lew, who owns his stake in Myer via Premier Investments, has threatened to call an extraordinary general meeting of shareholders to replace Myer’s current directors with a mix of independent and non-independent candidates.
Last week he publicly called on the Myer board to release profit guidance for the financial year just passed, saying that potential directors needed some understanding of the department store group’s financial shape before agreeing to join the board.
Myer is in desperate need of a share price re-rating to convince its investors that it has a plan to retrieve its performance.Credit:Peter Rae
To date. Myer has provided no clarity on how it traded in the six months to July 2021 and there is a yawning gap between the $172 million it lost in the previous financial year and the market consensus of a $33.5 million profit for the 2021 financial year.
Myer is in desperate need of a share price re-rating to convince its investors that it has a plan to retrieve its performance. Without this, Lew’s pitch that he is Myer’s best chance of being saved will resonate among those that have witnessed the company’s earnings and share price deteriorate for years.
Interestingly Myer has enlisted the corporate advisory services of Ron Malek and Simon Mordant’s Luminis Partners.
This duo has gone into battle with Lew previously, having mounted the defence against Premier hostile bid for Just Group.
But this time around Malek, who is taking the lead, is not fending off a takeover offer but is defending a company with a poor record. He will understandably be running a line that Lew’s attempts to jettison the board is tantamount to getting control of Myer without a takeover.
Myer has plenty of modern day governance arguments in its favour. But Lew has Myer’s poor performance in his corner.
Over the past 11 years Myer shares have fallen more than 86 per cent. Last year its chairman Garry Hounsell quit after a prolonged attack from Lew and has not yet found a permanent replacement.
Lew carries a lot of sway in the retail sector and has a track record of publicly campaigning against those that impede his plans.
He has been battling with Myer for three years and history shows that Lew plays a long game.
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