The foreign takeover of David Jones has cleared its final hurdle, despite the corporate watchdog hitting out at a $400 million payday for billionaire Solomon Lew.
Federal Court Justice Kathleen Farrell approved the $2.2 billion takeover on Thursday, paving the way for South African retailer Woolworths to take control of Australia's oldest department store in August.
But the Australian Securities and Investments Commission refused to provide the court with a letter of consent for the takeover, due to concerns about an offer from Woolworths to retail mogul Solomon Lew.
Mr Lew bought into David Jones after the takeover proposal was announced and amassed a near 10 per cent stake, raising fears he could block the takeover.
But the billionaire ended up abstaining from Monday's shareholder vote after Woolworths offered him more than $200 million for his remaining stake in fashion retailer Country Road, in addition to the $200-plus million he will receive for his David Jones shares.
Woolworths already owns almost 88 per cent of Country Road and Mr Lew has been languishing on the share registry for 17 years, reportedly agitating for the South African company to buy him out.
ASIC's counsel John Halley SC told the court the regulator believed that amounted to a collateral benefit not available to other shareholders in the department store.
"ASIC remains of the view that the incentive that was provided did constitute a collateral benefit to Mr Lew," he told the court.
However, he said ASIC would not oppose a court order approving the takeover, in light of the overwhelming support for the $4-a-share offer from David Jones shareholders.
Justice Farrell's decision means Woolworths will take control of David Jones from August 1, with payments to the department store's shareholders to be dispatched on the same day.
Woolworths has high hopes of improving the performance of David Jones, which suffered through years of sliding revenue and profit before appearing to turn a corner with a lift in sales earlier this year.
Chief executive Ian Moir said Woolworths planed to move quickly to make changes to the department store.
"We now turn our focus to delivering the benefits that we have already identified from a combination of our business, completing our strategic review and implementing our integration plans," he said.
"For customers, the combination of David Jones and Woolworths is all about choice and value and we will now move quickly to deliver these."
Meanwhile, David Jones chief executive Paul Zahra, who has overseen the recent improvement in performance, plans to stay on under Woolworths.
David Jones shares, which were trading at $3.99 late on Thursday, are expected to stop trading on the ASX on Friday.
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