David Jones has defended its decision to disclose an unsolicited $1.65 billion takeover offer from a mystery UK private equity firm even though it had doubts about its credibility.
The troubled department store chain made public the mystery bid from EB Private Equity on Friday, sparking a share price surge before investor doubts began setting in.
With its shares sliding yesterday, David Jones put the stock into a trading halt as it prepared to announce that EB Private Equity had withdrawn its offer.
EB Private Equity claimed to be concerned about publicity surrounding the proposed deal.
The episode has sparked concerns among some shareholders about whether David Jones should have disclosed the EB offer at all.
In a letter to the Australian Securities Exchange (ASX) on Monday night, David Jones company secretary Caroline Waldron defended the retailer's handling of the EB bid.
She said that throughout, David Jones ensured it abided by the ASX's continous disclosure rules.
"The company was concerned to ensure that, at all times, there was not likely to be information in the public domain that would lead to trading based on a false market," Ms Waldron wrote.
She said the department store first received a written expression of interest from EB Private Equity on May 28.
However, due to the "highly conditional, uncertain and incomplete expression of interest", David Jones told EB it was unable to consider it.
David Jones received a further expression of interest on June 28 which it again considered incomplete and uncertain.
But, the following day, David Jones became aware that the offer was likely to be known by others and, therefore, made an announcement to the ASX, the company told the exchange.
David Jones said it decided not to name EB Private Equity (EBPE) in its first announcement, because of concerns the offer was dubious.
"The company was concerned not to give more credibility to the approach than was necessary pending receipt of more details from EBPE," David Jones said in its letter to the ASX.
However, David Jones said, it decided to name EB Private Equity after realising various media outlets had, and intended to publish, more details about the offer.
"In the period between the first announcement and the second announcement, the company became aware that international media outlets had details of the EBPE expression of interest as contained on a UK blog site and were intending to publish the details contained on the blog site," it said in the letter.
David Jones' shares closed 26 cents, or 10 per cent, lower at $2.33 on Monday, with more than nine million shares having changed hands.