"This is a compelling proposal which represents a significant premium to not only our intrinsic value but also to broker valuations and to recent share prices,'' David Jones chairman Gordon Cairns recommended to all stakeholders in a note.
On the back of the news, shares in the retailer surged 22.8 percent in early trade, jumping from 3.19 Australian dollars to 3.92. As noted by the local stock market authorities, the last time David Jones traded at that level was in July 2011. It is noteworthy that David Jones shares have nearly halved over the past five years.
David Jones enters exclusive talks with Woolworths
David Jones announced Wednesday that it has entered into a "scheme of implementation deed" with Woolworths. The news broke soon after the negotiations for a potential merger with rival retailer Myer didn´t success.
"Upon assessing the alternatives before it, the board has unanimously concluded that the Woolworths offer is a compelling option which realises value for our shareholders,'' Cairns said.
The 2.15 billion Australian dollars offer is higher than that of the October proposal by Australian rival Myer Holdings Ltd., which was quickly refused.
Myer said that, in light of Woolworths's approach, it has withdrawn its proposed "merger of equals," which didn't offer any premium to David Jones shareholders. "We have always maintained a disciplined approach to valuation," Myer said in a statement.
South African fashion retailer Woolworths is also the major shareholder of local fashion retailer Country Road. As the tender said, the deal will see it become one of the 10 largest department store operators in the world.