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Myer confirms approaching David Jones with merger proposal

January 31, 2014 (Australia)

Myer confirmed, in response to media speculation and a subsequent ASX and media release by David Jones, that it approached David Jones on 28 October 2013 with a proposal to merge the companies to create a sustainable, more competitive retailer, and provide growth opportunities for the combined business.

Myer believed such a merger would have delivered compelling value for the shareholders of both companies, as well as providing strategic opportunities to grow both brands.

The Board of David Jones declined the opportunity to engage with Myer on the proposal.

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.

As part of this review one option considered was a merger with David Jones and significant analysis was undertaken over an extended period leading to an approach being made. The confidential, non-binding, indicative proposal was conditional and also subject to regulatory approvals, due diligence and the unanimous recommendation of the David Jones Board in support of the transaction.

The proposal had a number of fundamental features, including:

The merged company would have operated Myer and David Jones as separate, iconic department store brands that would have been better equipped to compete effectively in the changing retail market;

Myer and David Jones would have been more clearly differentiated and the two brands would have provided an enhanced merchandise assortment, brand portfolio, and exclusive and private label offering, meaning the company would have appealed to a broader customer base and given customers greater choice and a better shopping experience;

The merged company would have generated pro forma sales and EBIT in FY2013 of approximately $5.0 billion and $364 million, respectively, before any cost synergies;

Based on analysis conducted at the time Myer expected that a merger could have achieved more than $85 million of ongoing annual cost synergies within three years, creating the potential for more than $900 million1 of value to be shared by Myer and David Jones shareholders; and

The merger could also have provided opportunities to maximise the value of David Jones’ property assets for shareholders.

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