Whatever it takes: Billionaire retail trader Solomon Lew has his Country Road revenge

Whatever it takes: Solomon Lew has his Country Road revenge

June 24, 2014 – 1:48PM

Elizabeth Knight

Business columnist

Solomon Lew has a long history with Woolworths and has fought a pitched battle with the South African retailer for nearly 20 years.

High stakes David Jones play could deliver Solomon Lew a $207m Country Road payday

Billionaire rag trader Solomon Lew has cemented his reputation as a master tactician – and one capable of using whatever it takes to achieve a commercial outcome.

He has just rung up $207 million on his personal cash register courtesy of his long time commercial nemesis, the South African retailing giant Woolworths and its chief executive Ian Moir. 

It’s a breathtaking victory for Lew who in one fell swoop gets the cash and the revenge.  Lew has 11.8 per cent of retailer Country Road and Woolworths has 88 per cent.

Lew has wanted Woolworths to buy him out at a hefty price for the past 20 years.

Over that time the South Africans had been telling Lew to get lost.  A few months ago Woolworths made a $2.2 billion takeover for David Jones – one which required shareholder approval.

Lew immediately saw the leverage opportunity. He waded into the market and picked up 10 per cent of David Jones stock –  representing a clear signal to Woolworths that he could block the bid.

On Tuesday Woolworths capitulated and make a takeover offer for Country Road thereby giving Lew his exit with the expectation that he will give Woolworths the green light to acquire all of David Jones.

And just to cover off on all the bases Woolworths has made its offer for Country Road conditional on winning support for its bid for David Jones.

These facts speak for themselves. But the spin speaks another language.

Woolworths says it has entered into no agreement with Lew and that of its own volition it decided out of the blue to bid for Country Road after 20 years of happily allowing Lew’s stake to be stranded. (No one else would have acquired this illiquid shareholding.)

The South Africans say they had no meetings with Lew however do admit to some early adviser-to-adviser conversations that they say were not substantive.

Rather Woolworths has decided that there are some benefits to owning 100 per cent of Country Road if it owns David Jones as well.

Sure they can save on Country Road’s listing fees and some administrative staff but most of the plans it had for Country Road and David Jones could have been undertaken without owning 100 per cent of Country Road.

The so called synergies have not been quantified – as would normally be the case when a takeover is announced.

Indeed if it was such a great idea then why didn’t Woolworths announce the offer for Country Road at the same time it embarked on the David Jones takeover.

This particular line in spin does present something of a stretch.

If Woolworths is to be believed and no threats were implicitly delivered by Lew or his team, his plan is all the more impressive. Without even a fingerprint Lew’s shadow was enough to scare Woolworths into buying him out of Country Road.

There are a number of reasons Moir wants to push the scenario that he acted on his own and was not strongarmed by Lew.

The first is that it isn’t a good look for a company to be (legally) extorted and the second is that Woolworths would be very aware that the deal cold get caught by laws that prevent one shareholder of a target company (ie Lew) from gaining a collateral benefit that would induce him to accept the offer.

Last but not least a bunch of Woolworths shareholders were suggesting last week they would be unimpressed about press rumours that the company might outlay a wad of cash (on top of the $2.2 billion for David Jones) to keep Lew happy.

These shareholders voted last week to approve the David Jones bid and the Woolworths board made no mention of taking out the Country Road minorities.

The deal therefore has to present a veneer that the offer for Country Road is not directed at satisfying Lew.

But the veneer gets particularly thin when one takes into account the price Woolworths is paying for Country Road – a whopping $17 per share.

These shares were trading at $12 a few weeks ago and $4 a few months ago.  Lew’s 70th birthday has come nine months early.


About bambooinnovator
KB Kee is the Managing Editor of the Moat Report Asia (, a research service focused exclusively on highlighting undervalued wide-moat businesses in Asia; subscribers from North America, Europe, the Oceania and Asia include professional value investors with over $20 billion in asset under management in equities, some of the world’s biggest secretive global hedge fund giants, and savvy private individual investors who are lifelong learners in the art of value investing. KB has been rooted in the principles of value investing for over a decade as an analyst in Asian capital markets. He was head of research and fund manager at a Singapore-based value investment firm. As a member of the investment committee, he helped the firm’s Asia-focused equity funds significantly outperform the benchmark index. He was previously the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. KB has trained CEOs, entrepreneurs, CFOs, management executives in business strategy, value investing, macroeconomic and industry trends, and detecting accounting frauds in Singapore, HK and China. KB was a faculty (accounting) at SMU teaching accounting courses. KB is currently the Chief Investment Officer at an ASX-listed investment holdings company since September 2015, helping to manage the listed Asian equities investments in the Hidden Champions Fund. Disclaimer: This article is for discussion purposes only and does not constitute an offer, recommendation or solicitation to buy or sell any investments, securities, futures or options. All articles in the website reflect the personal opinions of the writer.

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