"So it seems that because of the relationship between Woolworths and the Solomon Lew fellow that David Jones is not a done deal and it could go down to the wire. Of course my knowledge of Australian corporate laws and takeover percentages is very sketchy, but as Paul pointed out, it is probably the same as here, coming from British law. As the article points out, Lew does not have the ammunition, he can put up a big fight, but unless he has another 15 percent of shareholders on his side to reach the three quarters majority to give the blessing to the deal, he might find himself with a marginal score, because he quite possibly bought these shares just below the Woolworths bid for David Jones."
To market, to market to buy a fat pig. Mr. Market locally managed to end in the green, having been in catch up mode for the day, having missed work with a public holiday on Monday. Remember that the term public holiday means that the law makers put that day there because the law makers thought that it was important. In this instance, Youth Day, the commemoration of an event on that day back in 1976, that is important in our history. Ironically celebrated as youth unemployment continues to be the stinky corner of the topic board, not only here, but in many places around the world. I heard that fellow that everyones loves, because he speaks a lot of sense, Professor Jonathan Jansen suggest that young adults are always optimistic and always full of energy.
I guess that is why you know everything when you are twenty and realise ten years later at thirty how wrong you were. But as one person once put it to me, in this industry, financial services, you need newer and younger people to replace the old cynics from time to time. I guess the same could be said for any industry really. So young people for the future. The irony is that people want to hire others with experience, but if you are young, you have none to speak of. I guess the moral of the story is to make sure that you get your young people working as soon as possible, part time work in order to at least have some experience, any experience is better than none.
Confidence is something that you "have", it is conditioned from an early age I guess. Parenting, sigh, that is another chapter altogether in life! A tough one at that, everyone likes to believe their children are far superior to others. Milton Friedman said something along the lines that he could never quite figure out, on human behaviour, that people were selfish but yet for their children, they would sacrifice everything. Makes sense, you want your child to be the best and are willing to give them your all. I guess what is important in that equation is making sure that you remember that you too were once as tiny as that baby on that new doting parents shoulder.
Enough! I know nothing about behavioural economics! All I want to add to that is that having won the Ovarian lottery (a term coined by Warren Buffett), Patri Friedman, the grandson of Milton, went on to "cash in" at the World Series of Poker no less than four times. Not too sure what that means exactly, but it sounds like something that you might have to be smart to be able to do.
US equity markets were marginally higher overnight, the main event on the gunslingers calendar this week is the Fed meeting and the conclusion with the statement. Fedspeak is the science of being able to unpick the FOMC statement and determine by that what will happen next with interest rates, or what the health of the economy is, in the committee's minds anyhow. There are of course the projections for the US economy too, this is an important event and traders no doubt have been cursed with a lack of liquidity and volatility, I am pretty sure that camp is hoping for something fresh. Guidance on when rates will rise, the prediction market is suggesting this time next year.
Further winding in of the bond purchase program too, that no doubt will signal that the Fed are more than halfway to reducing that program to zero. Of course the Fed still has all those assets on their balance sheet. Before the financial crisis (the last one and not the next one being cooked up), the Fed's balance sheet was less than one trillion Dollars. Currently that is approaching 4.5 trillion Dollars. Well, as of June the 11th it was 4.340904 trillion Dollars. Most of that is made of Treasuries and Mortgage Backed Securities, quite long dated in nature so I am guessing that there is absolutely no hurry to unwind them. If anything, the Fed could actually hold all these assets to maturity, but I doubt that would happen.
On the local front we had the Woolworths shareholders suggesting that the South African shareholder base had given the board and company the necessary authority to proceed with the David Jones acquisition down under. Overwhelmingly, although not all resolutions, number 4 only got 97 percent, whereas the other resolutions gained in excess of 99 percent of the votes. I tried to look on the Woolies website under investor relations for the specific circular, but alas, it was not there to be found.
So what next? Well, Woolies now has to see the other folks, the David Jones shareholders are going to vote on the matter. As per the original times and dates in the initial SENS, this happens on the 30th of this month, in just under a fortnight. And because the time difference between Australia and here, we should know before market opens here in two Mondays time.
The purchase price is still, as it stands in Rand terms, a sizeable 21.5 billion. The funding thereof I guess will only be announced post a successful David Jones shareholder vote. But is it as easy as that? No, according to the Sydney Morning Herald (my favourite acronym - SMH), a fellow by the name of Solomon Lew (who as the article points out owns 11.8 percent of Country Road) has acquired 10 percent of David Jones in his personal capacity. Huh? Check it out -> David Jones a hostage in 17-year Country Road war.
So it seems that because of the relationship between Woolworths and the Solomon Lew fellow that David Jones is not a done deal and it could go down to the wire. Of course my knowledge of Australian corporate laws and takeover percentages is very sketchy, but as Paul pointed out, it is probably the same as here, coming from British law. As the article points out, Lew does not have the ammunition, he can put up a big fight, but unless he has another 15 percent of shareholders on his side to reach the three quarters majority to give the blessing to the deal, he might find himself with a marginal score, because he quite possibly bought these shares just below the Woolworths bid for David Jones.
I am not sure, all you need to know is that the deal is not a deal until the money is in the till, that is what a fabulous old client once told us! The sad part is that he is no longer with us, but the saying lives on!
Home again, home again, jiggety-jog. Markets are flat. All eyes not on Will.I.Am and his friend, but rather on the Fed this evening, tune in if that is your thing. State of the Nation? Well, the cynic in me said that you must read the five year ago SONA and see if anything of that has been achieved. Luckily for politicians, "things" have to go seriously wrong in order for people to change their minds.
Sasha Naryshkine, Byron Lotter and Michael Treherne
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