Shareholders to vote on Coles demerger next month

Wesfarmers on Friday provided further details on the $20 billion proposed demerger from Coles ahead of a shareholder vote on the matter on November 15.

If the demerger, which is subject to regulatory, court and shareholder approvals, proceeds, shareholders will retain their Wesfarmers shares. Eligible shareholders will be entitled to receive one Coles share for every Wesfarmers share held at the demerger record date.

Should the vote go through, it is expected that Coles will commence trading on the ASX on a deferred settlement basis from November 21.

Wesfarmers chairman Michael Chaney said that the company’s directors are unanimous in their recommendation to shareholders to vote in favour of the proposed resolution.

“Demerging Coles enhances Wesfarmers’ prospects of delivering satisfactory returns to shareholders by shifting our investment weighting and focus toward businesses with higher future earnings growth prospects,” Chaney said.

Wesfarmers managing director Rob Scott said that the post-demerger company would hold a portfolio of cash-generative businesses with leading positions in their respective markets. Wesfarmers would retain a 15 per cent stake in Coles and 50 per cent of the Flybuys loyalty program.

“Maintaining a strategic stake in Coles provides an important connection with Wesfarmers to reinforce opportunities to collaborate in the data, digital and loyalty areas,” Scott said.

“Flybuys will be better able to realise this potential as a leading loyalty coming through the ongoing support and investment of both Coles and Wesfarmers and by leveraging the broader networks of the Wesfarmers Group, including existing partnerships with Kmart and Target.”

Scott said that Wesfarmers was committed to providing Coles with a strong foundation for success and growth as an independent listed company, with net debt levels that support a strong investment grade credit rating.

Coles managing director Steven Cain said that he believes Coles is well positioned for success over the next decade.

“We will continue to focus on ensuring that Coles remains a trusted brand for Australians and maintains its market leading position by continuously improving the customer experience,” Cain said.

To this effect, Coles has entered into an agreement with logistic-solutions provider Witron to develop two new automated distribution centres for Coles over a five year period in an effort to modernise its supply chain.

“The investment we are making in this technology is expected to lower supply chain costs, provide safer working environments and enhance our business competitiveness,” Cain said.

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