Myer share raid won't buy board seat

Amid reports that Myer and Mr Lew's Premier Investments have already engaged in discussions, sources close to the department store claim Mr Lew's 11 per cent stake does not come with board representation.

More tellingly, one Myer insider said the question of whether Mr Lew or a representative from Premier would be offered a board seat came down to maintaining the "right balance" on the board.

"It becomes a question of whether you think you can manage all those relationships," one source said. "And it can become more complicated if it's a shareholder."

Retail analysts are divided on whether Myer's board or management is more at risk from Premier's unexpected swoop on its shares on Monday, but neither Myer nor Premier are making any public comment.

One investor said the board's response to former Myer chief executive Bernie Brookes' "demands" hurt its reputation.

And more recently, it's understood major Myer shareholders voiced concerns over the board's role in the $600 million turnaround plan put forward by current chief executive Richard Umbers as well as the speed of the recovery.

One analyst said Myer's first-half result had also raised questions over the board's commitment to a sales-led recovery, when cost-cutting was the key driver of revenue growth in the period.

Myer chairman Paul McClintock said he was not going to make any comment at this stage and it was "business as usual" at Myer.

Mr McClintock foreshadowed plans to add another director to the board at Myer's annual general meeting in November.

'Lew pressure'

Retail insiders warn Mr Lew will make his influence felt even if he doesn't agitate for board representation.

"He's an activist investor, he backs himself and he's been very successful in most of the things he's done," one source said. "If he doesn't get his way, there is the risk that he might start wielding his influence.

"I'm sure the board is looking at Mr Lew's history and thinking this isn't necessarily going to work out well."

But it's not just Myer's board that will be feeling apprehensive about Premier's share holding, there's also the management team led by chief Richard Umbers, who will face even greater scrutiny from Premier's team of experienced retailers.

Market watchers claim Mr Lew is skilled at throwing "bombs from the outside" as he proved as a minority shareholder in Country Road.

"I'm not sure he's even looking for a board seat," one analyst said. "It restrains him from acquiring more stock ... and it would be very un-Solomon to apply any sort of handbrake.

"Alternatively, would it be such a bad thing to have someone who knows as much about the opposition as Mark McInnes in the tent?" Mr McInnes was the chief executive of David jones before he joined Premier.

A number of retail analysts are puzzled by Premier's investment in Myer, question why it would invest in the "structurally challenged" department store sector.

Credit Suisse analyst Grant Saligari said Premier had bought into a mature retail market that was bracing for the arrival of global behemoth Amazon.

Takeover doubts

"Premier has indicated it does not intend to make a full takeover, and in our view ... there would be few compelling reasons for Premier to tie-up its balance sheet when it has a very high returning offshore retail expansion in Smiggle," Mr Saligari said.

"Either this is a significant vote of confidence in the Myer strategy or there is something else at play."

Broker Citi was more blunt in its assessment of the investment, particularly if it's not a precursor to a full takeover.

"It does not represent the ideal deployment of capital, in our view, as shareholders may view Myer as operating in a more challenging environment, mid-way through a turnaround strategy with relatively high exposure to Amazon," analyst Bryan Raymond said.

And he warned "mixed investor opinion" on the merits of a the acquisition may weigh on Premier Investments' share price in the medium term.

History suggests Mr Lew has picked up something about Myer and is positioning himself to capitalise on any activity, but Premier didn't rule out a takeover on Wednesday, either.

ASA director Stephen Mayne said Mr Lew was the "most prolific retail share trader in Australian history."

"More often it's trading share for profit rather than operational influence."