Woolies in R10bn shareholder offer

JSE-LISTED clothing and food retailer Woolworths will raise about R10-billion to repay the part of the money it borrowed for its R21.6-billion takeover of Australian retail chain David Jones.

The purchase has pushed Woolworths into the top 10 department store operators globally‚ giving it the scale to compete more effectively.

The company will release the details of its planned R10- billion renounceable rights offer today.

This will allow it to raise money more cheaply by allowing its existing shareholders to either buy more of its shares or decline the offer.

The rights offer announcement was made on Friday‚ a day after Woolworths released a strong set of results amid far weaker updates from its lower-end competitors‚ who have been struggling in a tight consumer environment.

Shares in the upscale retailer edged up 0.51% to close at R79.46 on Friday.

Showing that its customers were better protected from the weak economy than those of its competitors‚ Woolworths last week reported a 13% rise in sales to R39.9-billion for the year to June 29. Adjusted headline earnings per share were up 17.1% at 398c.

It paid for David Jones using R10-billion of its own cash‚ R9-billion from the equity bridge facility and a R2.7-billion facility provided by Australian banks.

It is this short-term funding‚ which is usually more expensive‚ that it wants to pay off using the money raised from shareholders.

Following the announcement‚ private money manager Vestact said Woolworths was using its good results to announce the fully underwritten renounceable rights offer.

The company's share price would be watched closely by the market prior to the numbers being set in stone today‚" Vestact said.

"The timing is all rather quick – fast-forward a month and the company will have [its] money from the shareholders‚ who will have the shares in their accounts by October 1." – BDlive