Myer has confirmed rumours that it approached rival department store David Jones with a proposal to merge the two businesses.
Yesterday a Myer spokesperson told SmartCompany the company “never comments on market rumours and speculation” but today it bowed to speculation and issued a statement detailing the originally confidential approach.
It said on October 28 last year it put to the David Jones board that a merger would create a “sustainable, more competitive retailer, and provide growth opportunities for the combined business”.
It pitched that a merger would deliver “compelling value” for shareholders.
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Myer said the board of David Jones declined to engage in discussions on the concept.
“Myer has for some time been reviewing and implementing a range of strategic initiatives to strengthen the company’s competitiveness, and has made good progress in seeking to best position the business to adapt to a changing retail environment,” Myer reported in a statement.
It said it had given the idea of a merger “significant analysis” over a period of time before the approach.
The idea was to keep the two brands separate, but with stronger definition in terms of their brand portfolio and shopping experience.
It said the merged company would have generated pro forma sales and EBIT in FY2013 of approximately $5 billion and $364 million respectively.
Myer said it could have culminated in more than $85 million of ongoing annual cost synergies within three years, creating the potential for more than $900 million of value for shareholders.
Talk of mergers between the two stores has been floated before. Yesterday Retail Doctor Group managing director Brian Walker said some rationalisation of department stores in Australia would make sense.
“There’s an argument that we have too many department store outlets in our country,” he says.
“Between Myer and David Jones, there are more than 100 department stores. And with Marks & Spencer looking at coming into Sydney, and all foreign department stores having online offerings now, I think we’ll definitely see a rationalisation of the department store model. There’ll either be smaller sites, or fewer sites.”
David Jones was contacted for comment but no response was issued prior to publication.