Under the deal, David Jones would pay A$400,000 for the Kirkcaldie & Stains brand and pay up to A$500,000 for chattels, if it wants them.
Kirkcaldie shares soar 21 per cent to $2.04 on the takeover announcement after a brief trading halt.
After the sale of its iconic inner-city building Harbour City Centre and paying off $23.5 million in bank debt, the retailer has $18 million in cash and equivalents, with a final $4.75 million instalment due in October.
Clouston said this afternoon:
"The end of Kirkcaldie & Stains as a much loved Wellington department store has been a very difficult decision to make, but we believe it is in the best interests of the company, the staff, our customers, and for Wellington," he said.
"The deal is subject to a shareholder vote at a Special Meeting by the end of July. If approved, Kirkcaldie & Stains will close in late January 2016.
"We understand that a new David Jones store will open sometime in mid-2016 after an extensive refurbishment of the space," he said.
"The Board announced at the last annual meeting that it was reviewing the future of the business, having sustained trading losses for the past seven years. We considered three strategic options. The three options were significant new investment in the business, downsizing the store, or divestment of the business.
"The option to invest in the business and re-invent the store for the new retail environment would have required much of the company's reserves. We formed the view that, as a relatively small company, to invest this money in a single large format store, is too greater risk to shareholders," Falcon said.
"The nature of retailing has dramatically changed in the last decade. We are a single large format store and we lack scale to be able to compete with multi store regional and global operators that are beginning to dominate the new retail environment.
"Therefore the Board has decided to recommend to shareholders that the Kirkcaldie & Stains store cease trading in late January next year, and in due course, the company will be wound up or sold, and funds returned to shareholders," he said.
The David Jones store will be the first outside Australia in the brand's 177-year-history.
David Jones chief executive Iain Nairn said it would give the company a "significant initial presence in New Zealand's growing market".
"We were excited when Kirkcaldie & Stains approached us. David Jones is a recognised brand in New Zealand and we're confident this beautiful building in this cosmopolitan city is the perfect home for our first New Zealand store.
"We are proud to reinvigorate the historic retail space and maintain it as the home of New Zealand's premium department store, when we open David Jones Wellington next year," Nairn said.
- Additional reporting: BusinessDesk
