After months of discussions, Myer and Premier Brands are going ahead with their merger agreement, combining the Myer apparel portfolio with Premier’s Apparel Brands portfolio including Just Jeans, Jay Jays, Portmans, Dotti and Jacqui E.

Following months of due diligence and discussions, first officially announced in June, the pair have entered a binding share sale and implementation agreement, with Premier Investments coming together with Myer and Apparel Brands. The deal is subject to shareholders of both groups voting in favour of the transaction, and if all’s well, expected to be completed in early 2025.

Under the deal, Myer will issue 890.5 million new, fully paid ordinary shares in Myer to Premier upon completion in consideration for Just Group. There’s also a contribution of $82 million in cash by Premier. Prior to completion, Premier will then complete an internal corporate restructure with Just Group to own Apparel Brands, which includes the Just Jeans, Jay Jays, Portmans, Dotti and Jacqui E.

As a sweetener to existing shareholders, Myer said it would declare a fully franked dividend of $0.025 per share before completion provided all conditions to the transaction have been satisfied.

Once the consideration shares are issued and the $82m is paid, existing Myer shareholders will own 48.5% of the issued capital in Myer, while Premier will receive 51.5% of issued capital in Myer. Immediately upon completion, Premier is to undertake an in specie distribution of all its Myer shares to eligible Premier shareholders on a pro rata basis, resulting in Premier shareholders becoming direct Myer shareholders.

All this will see Premier’s largest current shareholder, Century Plaza Investments and its associates – the private investment vehicle of Premier chairman, Solomon Lew – with a pro forma shareholding of 26.8%. Premier’s current shareholding in Myer is 31.2%. Lew will then join Myer as a non-executive director representing Century Plaza Group. Current executive chair, Olivia Wirth, remains in the post. Myer’s executive will also be augmented by new faces, including Teresa Rendo as managing director of Apparel Brands.

Among the rationale presented by Myer today for the deal is the fact it accelerates the department store’s key strategic priorities, delivers significantly enhanced scale, and brings together highly complementary customer bases.

Myer is also keen to access a new market for its Myer One loyalty program, which represents nearly three-quarters of all sales through the register. In all, the combination is expected to generate benefits of at least $30 million earnings per annual on a run-rate basis over the short to media term and provide significant earnings per share accretion on a pro forma FY24 basis.

“The combination of Myer and Apparel Brands is transformational for our business. If approved by shareholders, it will create a leading retail group with more than 780 stores across Austrralia and New Zealand, with a large and highly engaged customer base and capital to fund future investment and group,” said Wirth.

“Myer and Apparel Brands have highly complementary store footprints and customers who will benefit from an expanding omni-channel ecosystem that enables them to engage with the group’s loved brands when and how they want. The combination will create significant opportunities to supercharge our leading Myer one loyalty program, through greater reach, enriched data, enhanced cross-shop opportunities and increased personalisation to drive incremental sales growth.”

Wirth also saw the combined entity being in a better position to leverage capabilities in product development, design, sourcing and distribution, which would help Myer better realise the potential of its excusive brands and private label portfolio – all leading to improve margins for the group.

In its FY24 financial report, Apparel Brands reported sales of $791 million, with online sales representing about 16% of total revenue, and an EBIT of $76 million. The strongest sales generator was Just Jeans ($294m), followed by Jay Jays ($164m) and Portmans ($145m).

Combined, the pair expect to have annual sales exceeding over $4 billion, operating gross profit of $1.652bn, and more than 17,300 employees.

The transaction goes to vote at an extraordinary general meeting of Myer shareholders in late January 2025, with completion expected by early 2025.

- with additional reporting by Nadia Cameron.