Premier Investments and Myer today confirmed the proposal to merge Premier Apparel Brands and Myer. Premier shareholders will receive 7.2 Myer shares at a post synergies 13.0x PE valuation. Premier Investments retains high margin Peter Alexander and Smiggle and an investment in Breville.

Myer’s proposed merger with Premier’s Apparel Brands is a convenient solution for two ex-growth businesses. For Premier, the inferred multiple is only 4.1x EV/EBIT, which is low. Premier shareholders could receive 8.2 Myer shares, with upside through an estimated $55 million in synergies. The majority of the synergies will come from adding Premier to Myer stores in concession space and improved terms on sourcing product. The merger raises the prospect that a further Strategic Review for Premier is unlikely to crystallise much value.