Woolworths Holdings Limited has entered a deal to sell its entire shareholding in David Jones to Anchorage Capital Partners, an Australian private equity firm.
As part of the transaction, WHL will retain ownership of the flagship property asset in Bourke Street, Melbourne, which will be leased to David Jones on a long-term basis on market-related terms.
A transitional services agreement will remain in place for a period to ensure an orderly separation of David Jones from the Group. WHL anticipates the transaction to be complete by the end of March 2023.
The transaction is expected to improve the return on capital for WHL through the removal of c.R17bn ($1.4b) in liabilities relating to the David Jones store portfolio.
The sale is reportedly in the amount of $100 million according to a recent story by The Australian, significantly less than WHL's $2.1 billion purchase price of David Jones in 2014.
This sale concludes a comprehensive strategic review by WHL around the David Jones brand, which was undertaken parallel to a refresh of the Group's capital allocation framework.
WHL commended the progress made by David Jones over the past two years, which it said resulted in an improvement in its operational and financial health. However, it noted the brand no longer aligned to the strategic objectives of the Group.
WHL CEO Roy Bagattini said this is a major milestone in the repositioning of WHL towards growth.
“The strategic rationale at the time of the acquisition did not materialise to the extent originally envisaged," Bagattini said. "While David Jones has successfully executed on its turnaround, notwithstanding the Covid-19 disruptions, now is the right time for the business to operate under new ownership, while WHL refocuses on its core South African and Australian Country Road Group businesses."
In mid-October, David Jones CEO Scott Fyfe responded to a question from Ragtrader around speculation of the brand's then-rumoured sale.
"This is an iconic brand," Fyfe had said. "I've been brought in as CEO to put in a future direction, and the strategy, myself and the really capable team that pool together are clearly doing the right thing for the customers.
"You can see that in the results we've delivered, and we're focused on moving the business forward."