Wesfarmers sells chunk of Coles for $1 billion
31 March 2020, Written by Business News Australia
Wesfarmers (ASX: WES) has sold 5.2 per cent of issued capital in supermarket Coles Group (ASX: COL) for $1.06 billion.
The sale will proceed at $15.39 per share, and Wesfarmers expects to recognise a pre-tax profit on sale of around $130 million as a result.
Wesfarmers, the former parent company of the well-performing supermarket, will retain a 4.9 per cent interest in Coles post-sale.
The group has further agreed to retain its remaining shares in Coles for 60 days from completion of the sale.
Now that Wesfarmers' interest in Coles has fallen below 10 per cent, the Relationship Deed entered into with the supermarket at the time of the demerger will terminate and Wesfarmers will no longer have a director on the Coles Board.
Wesfarmers' sale of over half of its holdings in Coles comes as the supermarket is at the frontline of the fight against Covid-19.
Because it is classified as an essential service during this period of tight gathering restrictions Coles is in a unique position in that it can stay fully operational (though perhaps somewhat overburdened) until the restrictions are lifted.
Despite Coles' importance to the Covid-19 effort Wesfarmers managing director Rob Scott says the company needs to focus on its balance sheet flexibility to ride out the economic storm.
"We have been pleased with the performance of Coles since the demerger and the very important role Coles is providing, and will continue to provide, to Australian households during the COVID-19 crisis," says Scott.
"This divestment crystallises an attractive return for shareholders since demerger and further enhances Wesfarmers' strong balance sheet position."
The two businesses will continue to operate the flybuys joint venture, with both groups retaining a 50 per cent interest in the business.
Business News Australia
Author: Business News Australia