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Myer's (ASX: MYR) new executive chair Olivia Wirth has wasted little time in shaking up the retail giant's business, proposing a merger with Premier Investments (ASX: PMV) that would see its apparel brands Just Jeans, Jay Jays, Portmans, Jacqui E, and Dotti brought under the same corporate roof.
Myer has not attached a price tag to the deal, instead offering shares to Premier shareholders in exchange for the brands on a proportional basis around maintainable earnings and enterprise values.
The apparel brands are currently sold across a retail network of 717 stores across Australia and New Zealand, and generated revenues of $845 million in FY23 - around a quarter of Myer's $3.36 billion in sales over the same period.
Premier Investments is already Myer's largest shareholder with a stake of 28.79 per cent, and over the years its chairman Solomon Lew has engaged in several spats against the Myer board and outgoing CEO John King, who will be replaced by Wirth.
Premier's board believes the offer "warrants further consideration".
If a deal materialises, Premier shareholders would effectively become shareholders in both companies via separate share tickers, although the number of brands within Premier's stable would be heavily reduced to stationery group Smiggle and sleepwear brand Peter Alexander, both of which it has been trying to spin off as separate businesses anyway.
Under the restructuring of ownership Premier would no longer be an investor in Myer, although Lew would maintain his position as the biggest holder of Myer shares via his private investment vehicle Century Plaza Investments, which owns almost a third of Premier.
Any deal would also be subject to both parties agreeing on the transaction terms and merger ratio, approval from the board and shareholders of both companies, and regulatory approvals.
Myer's board believes the businesses are highly complementary and a combination has the potential to generate significant value as Myer focuses on enhancing and expanding its private label and exclusive brands portfolio.
The department chain claims there will be potential cost and revenue synergies across supply chain, sourcing, property and brand management, as well as benefits from having a larger and more diversified shareholder base with improved trading liquidity and access to capital.
Unsurprisingly given Wirth's history as the former CEO of Qantas Loyalty, Myer also highlights the ability to leverage the MYER one loyalty program across an enlarged customer base.
"Against the backdrop of a changing retail landscape, Myer has commenced a thorough review of its strategic direction and growth opportunities, focused on increasing profitability, improving returns and driving sustainable earnings growth for our shareholders," Wirth says.
"While Myer has one of Australia’s strongest retail brands, store networks and loyalty programs, there is a significant opportunity to reinvest in our product offering, customer engagement capabilities and further optimise our supply chain to achieve our full potential.
"As part of this review, Myer is exploring both organic and inorganic investment opportunities that align with our strategic focus areas to create value for Myer shareholders. It quickly became clear that the idea of a combination of Myer and Apparel Brands offered significant potential synergies and prospects for growth, evidently warranting further examination."
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