Woolworths sells ailing David Jones

Woolworths agreed to sell Australia’s oldest department store chain David Jones to Anchorage Capital Partners, ending an expensive misstep for the Cape Town-based retailer.

The deal will remove about R17 billion ($965 million) of liabilities related to the David Jones store portfolio, with the final value of the deal to be determined by the end of March, when the transaction is expected to be completed, Woolworths said in a statement Monday.

Management expects to get more than the carrying value of the David Jones assets, it said.

Under former Chief Executive Officer Ian Moir, Woolworths tried to replicate its successful South African upmarket food business in David Jones, but it didn’t work.

In October, CEO Roy Bagattini said the David Jones purchase didn’t make sense, with the two retailers being fundamentally different.

Woolworths primarily sells own-branded goods and its Australian counterpart mostly offers other brands.

Woolworths will keep the flagship store in Bourke Street, Melbourne, which will be leased to David Jones on a long-term basis on market-related terms, it said.

There will also be a transitional services agreement “for a period of time to ensure an orderly separation of David Jones from the group.”