Sales season has come early at Myer, with the department store chain unveiling an ambitious plan to acquire clothing brands Just Jeans, Jay Jays, Portmans, Jacqui E and Dotti.
The non-binding, indicative and conditional offer for Premier Investments' Apparel Brands, announced on Monday, would result in Myer taking full ownership of the labels in exchange for new shares in Myer to Premier shareholders.
The purchase, if accepted by Premier, would be a massive boost to Myer's earnings.
Apparel Brands is forecast to rake in $130 million in profit in the next financial year, while Myer's profit for calendar year 2023 was $88 million, says E&P Capital retail analyst Phillip Kimber.
Premier and Myer agreed to conduct mutual due diligence and discuss purchase terms.
The announcement was greeted with cheers by investors, with Myer soaring 17 per cent to 75.5 cents in morning trading. Premier climbed a more modest 3.5 per cent.
"There would be some buying synergies by combining Myer's private label purchases with Premier's Apparel Brand purchases as well as other non-product procurement," Mr Kimber said.
It comes after Premier Investments announced a strategic review into its businesses, which flagging it would consider spinning-off several brands.
Myer says it sees "significant opportunity" from combining the businesses and has commenced a review of its own strategic direction.
"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," said Myer executive chairwoman Olivia Wirth.
Premier believes the proposal offers "meaningful opportunity for both businesses".
"The proposed combination has the potential to deliver a step change in Myer's scale and market position, deliver synergies and drive sustainable earnings growth," its board said in a statement to the ASX.
"Premier shareholders would benefit given Premier's existing shareholding in Myer and because Premier shareholders would become shareholders in Myer."
Premier's controlling chairman Solomon Lew also owns just under a third of Myer shares.
If accepted, Premier would exit its stake of Myer and its shareholders would be awarded Myer shares directly.
Mr Lew would join Myer's board as non-executive director.
Mr Kimber noted many Premier shareholders were more interested in the business's Peter Alexander and Smiggle brands and may not be interested in holding Myer shares long-term.
Premier acquired Apparel Brands, then called Just Group, in a deal worth more than $810 million in 2008.
Myer has appointed Barrenjoey Capital as financial adviser and Clayton Utz as legal adviser for the bid, while Premier has contracted UBS for financial advice and Arnold Bloch Leibler for legal.
