Wesfarmers announced their intention to demerge Coles, along with senior leadership changes, on 16 March 2018.
Wesfarmers will retain 15 per cent of Coles and 50 per cent of flybuys.
Eligible shareholders will receive one Coles share for every Wesfarmers share that they hold.
“Demerging Coles enhances Wesfarmers’ prospects of delivering satisfactory returns to shareholders by shifting our investment weighting and focus towards businesses with higher future earnings growth prospects,” Chairman Michael Chaney said.
In short, Coles does not meet Wesfarmers’ hurdle rate of return for capital employed (ROCE). A defensive, non-cyclical business, Coles on its own may justify a lower required ROCE.
Coles Demerger (November 2018)
Coles Group Limited (COL) commenced trading on the ASX on 21 November 2018, after the spin-off from Wesfarmers was approved by the Supreme Court of WA.
Trading is initially on a deferred settlement basis, with the demerger expected to be implemented on 28 November 2018.
- Following the Demerger, Wesfarmers will continue to be one of Australia’s largest listed companies and private sector employers with around 105,000 employees.
- Wesfarmers’ business operations will include Bunnings, Department Stores (K-mart & Target) and Officeworks retail divisions and the Industrials division with businesses in chemicals, energy and fertilisers, and industrial and safety products.
- Wesfarmers will also have a number of other non-controlling interests, including a 15 per cent interest in Coles.
- For the year ended 30 June 2018, Wesfarmers’ post Demerger pro forma revenue was $27.5 billion, pro forma EBIT from continuing operations was $2,734 million and pro forma EBIT from continuing operations and excluding significant items was $3,040 million.