For most of his life, Solomon Lew has rarely struck a deal where he hasn’t come out on top.
If reaction to the much-telegraphed merger between the clothing labels in his Premier Investments empire and the ailing Myer, he’s once again emerged a winner.
Premier shares surged more than 11 per cent, while Myer’s stock initially rose before ending the day slightly lower as investors digested the details.
But this is no ordinary transaction where both parties strike a deal and part ways.
Once completed, Lew will be the single-biggest shareholder in both companies, with almost 27 per cent of the more than century-old department store. Premier Investments will hold another 31 per cent.
He has a lot riding on this transaction, more than mere money.
Now pushing 80, Lew has been pursuing Myer for years at a time when shoppers and investors have grown tired of a business model many reckon belongs to a bygone era.
Refloated on the stock market 15 years ago, the stock price has languished as profits have proven elusive after its assets have been plundered by private owners.
Loyalty may hold the key
The resurrection of Myer will be no easy task.
Leading the renewal is Olivia Wirth, the former head of the Qantas loyalty program who was also once considered a contender for the airline’s top job when Alan Joyce took flight.
If department stores seemed old hat and antiquated, Myer seemed unconcerned and in no hurry to shift gears.
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For years, everything about Myer has been a tale of shrinking; its floor space, the ratio of staff to customers, the share price, its earnings.
Wirth is now talking growth. The data gathered through the company’s Myer One program, with more than 10.6 million customers, will be the engine room for that momentum.
“The data we have in our Myer One program ensures we have what our customers need and ensures we get the right products in front of them,” she told ABC’s The Business.
According to Wirth, the beauty of department stores is that they have a huge variety of goods and, with the addition of Premier’s five apparel brands, the operation now will cater to all age groups.
“We have an offering for every Australian.”
The addition of 720 stores across Australia and New Zealand from Premier’s suite of brands that include Just Jeans, JJs, Dotti, Portmans and Jacqui E to Myer’s 56 outlets is also crucial to fuelling that growth.
According to Wirth, combining the two operations should result in about $30 million a year in cost savings once the businesses are fully integrated.
The past two years have been among the toughest in retail for decades as consumer confidence has been battered by the torrid round of rate hikes that has hit new home owners and renters hard.
Rate cuts may be another fillip to the combined group’s future.
Clinging to the past or a vision for the future?
Lew has a long and colourful history with the firm. His first business, as a teenager, was supplying dresses to Myer and he later built a large stake that catapulted him into the chairman’s seat after Myer merged with food retailer Coles.
But his time in the chair was mired in controversy, first over the extent of his private transactions with the group and later when it emerged that Myer had guaranteed Premier Investments against losses, a case unsuccessfully pursued by the then-corporate regulator through the courts.
With Lew removed from the board, Coles hived off Myer to private equity group Texas Pacific and then, just before the global financial crisis, Coles was bought by Wesfarmers.
As a major shareholder, and with the Coles sale struck in the dying days of the 2007 boom, Lew pulled in more than $1 billion.
But the allure of Myer has proven difficult to shake.
Seven years ago, Lew began accumulating the stock, publicly criticising the board and management and slowly shoring up control.
For long-suffering shareholders, his involvement has presented at least a glimmer of hope.
For Lew, his entire life’s work and reputation hinges on its success.
