DAVID Jones has agreed to be bought by South Africa's Woolworths for $2.15 billion.

Under the deal, David Jones shareholders will receive $4.00 for every share they own, which is more than 25 per cent above the closing price of the department store’s shares on Tuesday.

David Jones has entered into a scheme of implementation deed with the South African company, and the department store’s board of directors have recommended shareholders accept the proposal.

“This is a compelling proposal which represents a significant premium to not only our intrinsic value but also to broker valuations and to recent share prices,” chairman Gordon Cairns said.

“It represents a substantial earnings multiple.”

media_camera The takeover bid comes amid Sydney Fashion week and follows a proposal by rival Myer to merge the two stores.

Mr Cairns said the offer from Woolworths, which owns a chain of retail stores in South Africa, was a better deal for shareholders, compared to a high profile merger proposal from rival Myer.

“Upon assessing the alternatives before it, the board has unanimously concluded that the Woolworths offer is a compelling option which realises value for our shareholders,” he said.

Myer originally proposed a merger between the two stores in October last year, before asking David Jones to reconsider just one month ago.

media_camera Jessica Gomes pictured in a Valentino design during the David Jones and Crown Resorts Autumn Racing Ladies Lunch.

Woolworths says the current deal will see it become one of the 10 largest department store operators in the world.

“This transaction provides us with the scale and opportunity to deliver significant benefits to our shareholders, and our customers in South Africa and Australia,” Woolworths chief executive Ian Moir said.

The South African retailer is not related to the Australian supermarket giant of the same name.

media_camera David Jones CEO Paul Zahra pictured in their Sydney store.

Moir said Woolworths would look to strengthen David Jones to allow it to better compete in a changing retail landscape.

“We will work with the David Jones management team to deliver the sound strategies they have already set in place,” he said.

“Woolworths will bring additional capabilities, financial strength and significant scale to accelerate these strategies and offer a greatly enhanced value proposition, delivering on-trend product as part of the most exciting and innovative shopping experience in the market.”

The deal is expected to go ahead in mid July, but is subject to approval from David Jones shareholders and federal Treasurer Joe Hockey.

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Originally published as David Jones in foreign takeover