WOWOW - WOOLWORTHS HOLDINGS LIMITED - Announcement relating to the proposed acquisition of David Jones Limited [JSE Securities Exchange - SENS]
Announcement relating to the proposed acquisition of David Jones Limited

(Incorporated in the Republic of South Africa)
Registration number 1929/001986/06
Share code: WHL ISIN: ZAE000063863
("WHL" or "the Company" or "the Group")





    Shareholders of WHL ("WHL Shareholders") are referred to the announcement
    released on the Stock Exchange News Service ("SENS") of the JSE Limited
    ("JSE") on Wednesday, 9 April 2014 and published in the press on Thursday, 10
    April 2014 (the "Terms Announcement"), which sets out the salient terms of the
    proposed acquisition by WHL of the entire issued share capital of David Jones,
    the iconic Australian department store retailer, for a total cash consideration of
    A$2,149 million (approximately R21,378 million, based on a forward exchange
    rate of 9.95 A$/R) (the "Offer Consideration").

1.1 Acquisition Rationale

    The combination of WHL and David Jones provides significant advantages
    that will benefit both companies and their customers. The Group will have
    increased scale that will drive significant efficiencies and economies through
    enhanced global sourcing and the ability to leverage common seasonality
    and fashion trends, improving value for the customer and overall
    profitability. Each business will be well equipped to compete with global
    retailers in their respective markets.

    WHL has operated successfully in Australia for over 16 years through its
    subsidiary, Country Road Limited ("Country Road Group" or "CRG"), which
    operates the Country Road, Trenery, Witchery and Mimco brands.

    Post the Proposed Acquisition, WHL will become a leading southern
    hemisphere department store operator. It will become one of the largest
    companies listed on the JSE, retaining its headquarters in Cape Town.

    WHL is committed to developing its local South African supply chain, thus
    boosting Southern African Development Community exports. WHL would
    seek to leverage this supply base and identify opportunities to export such
    goods under WHL brands to Australia.

    As an iconic Australian retail brand, David Jones provides the perfect
    platform for expansion in Australia, occupying a similar customer positioning
    to WHL in South Africa at the premium end of the apparel market, with both
    businesses enjoying strong aspirational brand identities and a strong
    alignment of values that put the customer first, offering excellent service and
    quality. The Proposed Acquisition supports WHL's strategy and is a rare
    opportunity to create a southern hemisphere retailer with meaningful scale,
    better able to compete with global retailers, leverage common fashion
    seasonality with enhanced sourcing capability and leverage the South
    African headquartered design, buying and procurement capability.

    WHL recognises the knowledge and experience of the David Jones
    management team. Working together with them, WHL plans to accelerate
    David Jones' strategic initiatives to consolidate and grow its competitive
    position and performance.

    WHL has identified the following key initiatives which it believes will deliver
    synergies of at least R1.4 billion (A$130 million) per annum in earnings
    before interest and taxation within five years after the completion of the
    Proposed Acquisition. These initiatives include:

-   the profitable expansion of the David Jones private label product
-   overall group profitability improvement through increased volumes and
    group-wide lower cost sourcing;
-   the introduction or expansion of the WHL brands within David Jones
-   the introduction of an improved loyalty programme based on existing
    WHL knowledge and expertise (including enhanced use of customer
    data for store and product decisions);
-   significantly increasing omni-channel initiatives and presence, including
    enhancing the performance of David Jones online sales;
-   the roll out of successful village format stores; and
-   enhanced productivity through better profiling and allocation systems
    and processes.

  1.2 Summarised pro forma financial effects of the Proposed Acquisition
       ("Pro Forma Financial Effects")

       At the time of the Terms Announcement the Pro Forma Financial Effects
       had not been completed. Further to the Terms Announcement and in terms
      of the Listings Requirements of the JSE, the Pro Forma Financial Effects
       are set out in paragraph 3 below. As outlined below, historical performance
       may not be an appropriate reflection of future prospects.

  1.3 Circular to WHL Shareholders

       WHL Shareholders are advised that a circular, setting out the full terms of
       the Proposed Acquisition (the "Circular") and containing a notice convening
       a general meeting of WHL Shareholders to approve the resolutions required
       to authorise the Proposed Acquisition (the "General Meeting"), has been
       posted to WHL Shareholders today. The Circular is available on the WHL
       website at www.woolworthsholdings.co.za.

       The salient dates and times of the posting of the Circular as well as the
       General Meeting and the key dates applicable to shareholders of David
       Jones are set out in paragraph 5 below.


  The total expected purchase consideration for the Proposed Acquisition,
  comprising the Offer Consideration and estimated total transaction costs,     is
  expected to be A$2,246 million (approximately R22,351 million) ("Total Expected
  Purchase Consideration"). An A$/R exchange rate of 9.95 (estimated forward
  exchange rate on completion date), has been applied.

  WHL has taken, and will continue to take steps to manage foreign exchange risks
  in connection with the Proposed Acquisition up to the time of completion of the
  Proposed Acquisition.

  WHL intends to fund the Total Expected Purchase Consideration and existing
  David Jones working capital requirements (including the refinancing of existing
  debt), via a combination of:
-   R10,000 million from a combination of (i) WHL cash on hand, and (ii) to the
    extent that the WHL cash on hand available to fund the Total Expected
    Purchase Consideration is less than R10 000 million, on or about the date that
    the Proposed Acquisition will be implemented, the utilisation of Term Funding
    (detailed below);
-   a A$400 million (R3,980 million) bridge loan ("Australian Bridge Facility"); and
-   the balance of the Total Expected Purchase Consideration being funded from
    the Equity Bridge Facility ("Equity Bridge Funding").

  Woolworths Proprietary Limited ("WPL"), a wholly-owned subsidiary of the
  Company, will also raise a R10,000 million term facility ("Term Funding") to
  refinance an existing short term facility drawn down to fund the Group's working
  capital commitments and fund any shortfall to meet the Total Expected Purchase

  The table below sets out the sources and uses with regards to the Total Expected
  Purchase Consideration:

Sources:                                                R million      A$ million
WHL cash/ term facility                                   10,000.0          1,005.0
Australian Bridge Facility                                 3,980.0            400.0
Balance of funding from Equity Bridge Funding              9,366.7            941.4

Total                                                     23,346.7         2,346.4

Uses:          R million        A$ million
Offer Consideration                                      21,378.1           2,148.6
Estimated transaction costs (including                      973.6              97.8
financing and related costs)
Refinance David Jones net debt                              995.0             100.0
Total                                                    23,346.7            2,346.4

  The Term Funding, Australian Bridge Facility and Equity Bridge Funding have
  been fully underwritten by Citibank, N.A., South Africa Branch, Citibank, N.A.,
  Sydney Branch, JPMorgan Chase Bank, N.A., Johannesburg Branch, JPMorgan
  Chase Bank, N.A. and The Standard Bank of South Africa Limited (acting through
  its Corporate and Investment Banking division) ("Standard Bank") (collectively the

  The Equity Bridge Funding is expected to be repaid out of the proceeds of an
  underwritten renounceable rights offer proposed to be undertaken by the
  Company (the "Proposed Rights Offer"). WHL intends to commence the
  Proposed Rights Offer after the Proposed Acquisition has been completed. The
  Company will determine, in consultation with the Funders, the detailed terms of
  the Proposed Rights Offer, including the amount of financing to be raised, the
  offer price per share and number of shares to be issued taking into consideration
  market conditions at such time, which details once finalised will be released on
  SENS and will be set out in the Proposed Rights Offer circular to be posted to
  WHL Shareholders in due course.

  WHL has entered into a volume standby underwriting agreement with the
  Funders in relation to underwriting the Proposed Rights Offer ("Equity
  Underwriters"). The Equity Bridge Funding is conditional on these underwriting
  arrangements remaining in force with the Equity Underwriters, which in turn is
  conditional on other customary conditions including, inter alia: (a) WHL
  Shareholder approvals; (b) the Scheme Implementation Deed (the written
  agreement in relation to the Proposed Acquisition, entered into between WHL,
  Vela Investments Pty Limited (wholly owned subsidiary of WHL) and David Jones
  on Wednesday, 9 April 2014 remaining in force; (c) customary due diligence; (d)
  no force majeure event; and (e) no change of control of WHL.

  The transaction costs as set out above include the Proposed Rights Offer related
  costs and exclude South African Value Added Tax ("VAT") or Australian Goods
  and Services Tax ("GST") and therefore differ from the costs included in terms of
  the Pro Forma Financial Effects, set out in paragraph 3 below.

  The capital structure of the Proposed Acquisition was carefully considered as to
  its effect on the cash flow position of the Group.

  Assuming a continuance of the recent performance of WHL and David Jones, the
  Proposed Acquisition is not expected to restrict WHL's ability to maintain its
  dividend policy and fund future growth.

  Further details regarding the terms of the financing associated with the Proposed
  Acquisition are set out in the Circular.


  The table below sets out the Pro Forma Financial Effects of the Proposed
  Acquisition. This is based on the published unaudited interim results of WHL for
  the 26 weeks ended 29 December 2013 released on SENS on Thursday, 13
  February 2014 ("WHL Interim Results") and the published unaudited reviewed
  interim results of David Jones for the 26 weeks ended 25 January 2014 released
  on the Australian Securities Exchange ("ASX") on Wednesday, 19 March 2014
  ("David Jones Interim Results").

  The Pro Forma Financial Effects have been prepared to assist WHL
  Shareholders in assessing the impact of the Proposed Acquisition on the
  Company's earnings per share ("EPS"), diluted EPS, headline earnings per share
  ("HEPS"), diluted HEPS, adjusted HEPS, diluted adjusted HEPS, net asset value
  per share ("NAV") and tangible net asset value per share ("TNAV"). The Pro
  Forma Financial Effects have been prepared in a manner consistent in all
  respects with International Financial Reporting Standards ("IFRS"), the
  accounting policies adopted by WHL as at 30 June 2013, and the Revised SAICA
  Guide on Pro Forma Financial Information and the Listings Requirements of the
  JSE. The Proposed Acquisition has been accounted for in terms of IFRS 3:
  Business Combinations.

  No adjustments have been made in these Pro Forma Financial Effects for the
  Proposed Rights Offer or costs associated thereto.

  The WHL audit committee has reviewed and has satisfied themselves with the
  compilation, contents, accuracy and presentation of the Pro Forma Financial
  Effects and the financial information from which it has been prepared.

  The board of directors of WHL ("the WHL Board") is responsible for the
  compilation, contents, accuracy and presentation of the Pro Forma Financial
  Effects, and for the financial information from which it has been prepared.

  The Pro Forma Financial Effects have been prepared for illustrative purposes
  only, and, because of their nature, will not fairly present WHL's financial position,
  changes in equity, results of operations or cash flows.

  A simple consolidation of the historical financial information will not appropriately
  reflect the future prospects of the combined businesses due to, inter alia, the
  following factors:
-   the impact of various recent strategic initiatives implemented by David Jones;
-   the ability to realise significant value through a combination of WHL and David
    Jones to be achieved through a number of key initiatives set out in more detail
    in the Circular;
-   efficiencies in the optimal funding structure of the combined group; and
-   movements in the A$/R exchange rate.

  Consequently historical performance will not be an appropriate reflection of future
  prospects. Excluding the impact of the non-recurring transaction costs,
  incorporating the phased realisation of the various value creation opportunities
  from the combined group and considering the expected impact of the Proposed
  Rights Offer, the EPS impact is expected to be broadly neutral by the 2016
  financial year and accretive thereafter.

                                                    Pro forma       Pro forma
           Before the       After the
                                                    Proposed        Proposed
                                                   Acquisition     Acquisition          %
                                                            (1)             (2)   Change
EPS (cents)                                              191.2           122.5      (35.9)
HEPS (cents)                                          192.4           123.7      (35.7)
Adjusted HEPS (3)                                        197.5           180.4       (8.7)
Diluted EPS (cents)                                      188.2           120.6      (35.9)
Diluted HEPS (cents)                                     189.4           121.8      (35.7)
Adjusted diluted HEPS(3)      194.5           177.6       (8.7)
Weighted average number of shares in issue
for EPS and HEPS (millions)                                756.8          756.8
NAV (cents)                                                 796             742      (6.8)
TNAV (cents)                                                480         (1 043)    amp;gt;(100)
Number of shares in issue for NAV and TNAV
(millions)                                                 759.3         759.3           -

1. The "Before the Proposed Acquisition" financial information has been
   extracted from the WHL Interim Results.
2. The Pro forma "After the Proposed Acquisition" financial information
   comprises the "Before the Proposed Acquisition" financial information
   adjusted, for the following principal assumptions:
2.1    Transaction date assumed to be 1 July 2013, the start date of WHL's
       FY2014 interim period ("Transaction   Date") for statement of
       comprehensive income items and 29 December 2013 for statement of
       financial position items. Statement of comprehensive income items
       have been converted to Rand at the average exchange rate for the
       period 1 July 2013 to 29 December 2013 of A$1:R9.28, and statement
       of financial position items at the closing rate at 29 December 2013 of
2.2    The financial information of David Jones has been extracted from the
       David Jones Interim Results.
2.3    Transaction costs, excluding debt underwrite and commitment fees,
       are estimated at R390 million and have been expensed. These costs
       are to be funded out of acquisition funding.
2.4    An adjustment of R11 million has been made for additional
       depreciation on the revalued portion of David Jones' property, plant
       and equipment over the remaining estimated useful life. In this regard,
       properties have been revalued by R1,491 million.
2.5    Debt commitment fees totalling R311 million are capitalised to the debt
       raised and amortised over the period of the debt, using the effective
       interest method. The amortised portion is included in finance costs.
2.6    Settlement of the Proposed Acquisition purchase price is expected to
       be applied to refinance existing David Jones debt and to fund future
       working capital requirements.
2.7    Interest on the R-denominated term loan facilities raised to partially
       settle the proposed acquisition purchase price is calculated at
       Johannesburg Interbank Agreed Rate ("JIBAR")-linked rates.
2.8    Interest on the A$-denominated facility raised to partially settle the
       Proposed Acquisition purchase consideration is calculated at a Bank
       Bill Swap Bid Rate-linked rate.
2.9    Interest on the R-denominated Equity Bridge Facility raised to partially
       settle the Proposed Acquisition purchase consideration is calculated at
       a JIBAR-linked rate.
2.10   The tax deductibility of certain interest costs and depreciation has
       been calculated applying legislated rates of taxation of 28% in South
       Africa and 30% in Australia, as applicable.     Transaction costs and
       finance costs on the Equity Bridge Facility are not considered to be tax
2.11   Tangible assets are depreciated over their estimated remaining useful
       lives based on a provisional fair value exercise in terms of IFRS 3:
       Business Combinations, using fair values disclosed by David Jones in
       the David Jones Published Interim Results. Additional adjustments
       may arise from the final purchase price allocation, the nature and
       quantum of which are currently uncertain.
  3. Consistent with previously published information, Adjusted HEPS and
      Adjusted diluted HEPS have been presented. These amounts have been
      adjusted to exclude WHL's net unrealised foreign exchange losses of R54
      million (before tax) prior to the Proposed Acquisition, and transaction costs of
      R390 million relating to the Proposed Acquisition.
  4. The TNAV is based on NAV less goodwill and other intangibles assets
      ("intangibles") of WHL and intangibles arising from the Proposed Acquisition.
      Goodwill represents the value paid in excess of the provisional fair value of
      net assets and consists largely of synergies and economies of scale expected
      from combining the operations of David Jones into WHL.


  Further to the conditions precedent as set out in the Terms Announcement, WHL
  is pleased to advise that the:
  -   Australian Foreign Investment Review Board has notified WHL that it has no
      objection in terms of its foreign investment policy to the Company's proposal
      to acquire 100% of David Jones under the scheme of arrangement
      announced on 9 April 2014 ("the Scheme"); and
  -   Financial Surveillance Department of the South African Reserve Bank has
      approved the Proposed Acquisition.

  Accordingly, the condition precedent in clauses 3.1(a) and 3.1(c) of the Scheme
  Implementation Deed have been fulfilled.

  WHL will update WHL Shareholders on the progress in respect of the remaining
  conditions precedent as they become fulfilled or are waived, as appropriate.


    The salient dates and times for the posting of the Circular, the General Meeting
    and the key dates applicable to shareholders of David Jones, are set out below:

Key action                                                                        2014
Posting record date for a WHL Shareholder to be eligible to         Friday       9 May
receive the Circular
Posting date of Circular                                            Friday     16 May
First day on which the application made to the Federal
Court of Australia (the "Court") for the orders under the        Thursday      22 May
Corporations Act that the scheme meeting be convened is
Posting of booklet by David Jones to David Jones                    Friday     30 May
shareholders and approved by the Court, including a notice
of meeting, explanatory statement in relation to the Scheme
issued pursuant to Section 412 of the Corporations Act and
registered with the Australian Securities and Investments
Commission (together with proxy form) by*
Last day to trade to participate in and vote at the General         Friday     30 May
Voting record date to participate in and vote at the General        Friday      6 June
Last day to lodge forms of proxy in respect of the General       Thursday      12 June
Meeting by 10:00
General Meeting to be held at 10:00 in the Auditorium, 1st        Tuesday      17 June
Floor, Woolworths House, 93 Longmarket Street, Cape
Town, 8001
Results of General Meeting released on SENS                       Tuesday      17 June
Result of General Meeting published in the South African       Wednesday       18 June
David Jones scheme meeting*                                        Monday      30 June
Second Court date*                                             Wednesday         2 July
Suspension of trading in David Jones ordinary shares on       Thursday        3 July
the ASX*
Scheme implementation date and payment of the Offer              Thursday       17 July
* Applicable to David Jones shareholders only
1)      The above dates and times are subject to amendment. Any such material amendment will be released on SENS and
        published in the South African Press.
2)      All times above are local times in South Africa on a 24-hour basis, unless specified otherwise.


     The WHL Board unanimously recommends that WHL Shareholders vote in favour
     of all the resolutions necessary to approve and implement the Proposed
     Acquisition and matters pertaining to the implementation of the Proposed Rights
     Offer, as set out in the notice of General Meeting.

     All Directors with an interest in WHL intend to vote in favour of all resolutions
     necessary to approve and implement the Proposed Acquisition and matters
     pertaining to the implementation of the Proposed Rights Offer.


     As the Pro Forma Financial Effects have now been released, WHL Shareholders
     no longer need to exercise caution when dealing in their WHL securities.

Cape Town
16 May 2014

Investor contacts:
Ralph Buddle
Head of Corporate Finance and Investor Relations
T: +21 27 407 3250
M: + 27 83 412 4923

Financial and debt advisers to WHL:
Standard Bank

Legal advisers to WHL:
Gilbert +Tobin
Webber Wentzel

Transaction Sponsor to WHL:
Standard Bank

Independent Sponsor to WHL:
Rand Merchant Bank (a division of FirstRand Bank Limited)

Joint bookrunners and co-underwriters to WHL:
Standard Bank
J.P. Morgan

Reporting accountants and auditors to WHL:
Ernst & Young Inc.

Legal advisers to the Joint book-runners and co-underwriters and the
Bowman Gilfillan Inc.
Latham & Watkins
Allen & Overy

Certain statements in this announcement may be considered forward-looking.
Although WHL believes that the expectations reflected in any such forward-looking
statements relating to the Proposed Acquisition are reasonable, the information has
not been reviewed or reported on by the reporting accountants and auditors and no
assurance can be given by WHL that such expectations will prove to be correct.
WHL does not undertake any obligation to publicly update or revise any of the
information given in this announcement that may be deemed to be forward-looking.
The release, publication or distribution of this announcement in certain jurisdictions
may be restricted by law and therefore persons in such jurisdictions into which this
announcement is released, published or distributed should inform themselves about
and observe such restrictions.
This announcement is not an offer for the sale of securities. The securities
discussed herein have not been and will not be registered under the US Securities
Act of 1933 (the "US Securities Act"), or under any securities laws of any state or
other jurisdiction of the United States and may not be offered, sold, taken up,
exercised, resold, renounced, transferred or delivered, directly or indirectly, within
the United States absent an exemption from, or in a transaction not subject to, the
registration requirements of the US Securities Act and in compliance with any
applicable securities laws of any state or other jurisdiction of the United States. The
Company does not intend to register any part of the Proposed Rights Offer in the
United States.

Date: 16/05/2014 08:45:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE'). 
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