Myer is said to be considering ways to 'sweeten' its $3 billion merger proposal to David Jones by borrowing capital, enabling it to offer cash as well as shares, reports AFR.
The report suggests the retailer may be able to borrow up to $500 million to fund the merger it desires with high end retail neighbour David Jones, which it first proposed last year, but was rebuked.
Myer initially proposed a deal for DJ's shareholders whereby the latter's shares would be acquired in exchange for Myer's at a zero premium exchange ratio, that is 1.06 shares in Myer for each DJ share.
Myer is said to be upping the merger offer to David Jones due to the major differences between its respective share price. Bernie Brookes' department store is currently trading at $2.28 on the ASX, down 0.22%, compared to DJ's shares which are currently selling for 3.19, up 0.63%.
"Myer would have to lift its offer to at least 1.4 shares for every David Jones share to match its target's current value" according to AFR, meaning Myer shareholders may not benefit from a possible merger, as expected.
Last week, Myer half year results to January 25 lacked the same growth as David Jones. Sales rose just marginally to $1.7 billion, by 0.3% with net profit down 8.1% to $81 million.
DJ's on the other hand, fared better in the half year, sales rose 3.8% to $1.04 billion although profits also declined to $70.1 million, although fell by just $3 bn.
This latest twist in the Myer-DJ's saga follows DJ's announcement last week that it has appointed management consulting firm Port Jackson Partners, to assist with the assessment of the potential synergies and strategic benefits that can be created by Myer's merger proposal. This shows the retailer, headed by CEO Paul Zahra, is now taking the proposal seriously.
Yesterday, David Jones also announced it had appointed Macquarie Capital Limited as joint investment banking advisors to work alongside Gresham Partners Advisory, to assess Myer's offer.
Myer reckons synergy benefits would accrue to $85 million, although DJ's previously disputed this.