On Wednesday, Myer issued a 278-page explanatory memorandum to the ASX where it is stated why it is recommending to its shareholders that they should vote in favour of the mega Myer-Premier Investments combination on January 23.

It carried a detailed analysis by independent expert Kroll Australia which termed the combination as “fair and reasonable”.

Kroll said the retail market had changed substantially since South Africa’s Woolworths acquired David Jones for $2.1 billion in 2014. Last year, it sold David Jones to Anchorage Capital Partners private equity group for only $92.5 million.

“In the 10 years since the David Jones transaction, the outlook for department stores has deteriorated further, with the entrance of Chinese ultra-cheap fast fashion retailer Shein and online marketplace Temu, with the two companies gaining market share due to heavy discounting and aggressive social media marketing spend,” Kroll said.

“Retailers operating at larger scales are often better positioned to leverage their size to more efficiently run the company.”

Former Qantas executive Olivia Wirth was appointed Myer executive chairwoman last month

The proposed Myer-Premier Investments deal is expected to result in a footprint of more than 700 stores for the combined entity. Myer currently has 56 stores, but will take on 719 Apparel Brand stores of Just Jeans, Jacqui E, Dotti, Portmans, and Jay Jays across Australia and New Zealand.

“Bringing together two highly complementary businesses, the combination of Myer and Apparel Brands creates a leading omni channel retail platform of significant scale across Australia and New Zealand with pro forma historical annual sales of more than $4bn in fiscal 2024, a large and highly engaged customer base, and a stronger balance sheet to fund future investment and growth,” said Myer executive chair Olivia Wirth.

 

Kroll said that local retailers were increasingly facing competition from not just other department stores, but from newer entrants including large international fast fashion brands such as Uniqlo and Zara, and online retailers like The Iconic and Shein.

“More recently, the entrance of Chinese ultra-cheap fast fashion retailer Shein and online marketplace Temu has further intensified competitive pressures with the two companies gaining market share due to heavy discounting and aggressive social media marketing spend,” said Kroll.

“The competition from new entrants who have captured significant market share has been a key reason for the collapse of many Australian apparel brands including Oroton in 2018 and Mosaic Brands in 2024.”

Shein and Temu which offer rock-bottom prices on their products are rapidly gaining market share in Australia.

Data from research firm Roy Morgan released in August this year – several weeks prior to the Black Friday sales – showed that 3.8 million Australians aged 14+ bought at least once from Temu over 12 months, while 2 million bought at least once from Shein.

Roy Morgan noted that Temu’s shopper base grew 32 per cent, from 1.26 million in the Oct-Dec 2023 quarter to 1.66 million in the April-June 2024 quarter. Shein’s shopper base has grown 34 per cent, leaping from 830,000 monthly shoppers to 1.11 million over the same period.

It estimates that Temu and Shein together had close to $3 billion in annual sales in the 12 months to June 2024, which includes $1.7 billion for Temu and $1.1 billion for Shein.

With added scale to the business and hundreds of new stores under the combined entity, the Myer deal is expected to somewhat buffer against the onslaught of the mighty e-commerce players.

Myer will issue 890.5 million shares to Premier for the acquisition of the Apparel Brands business, and Premier will also Pay Myer $82 million in cash.

Myer shareholders (including Premier by way of its existing shareholding) will hold 48.5 per cent of issued capital in Myer, while Premier will receive 51.5 per cent of issued capital in Myer. The Myer shares will then be distributed to Premier Investments shareholders.