Thursday, April 25, 2024

Wesfarmers shareholders vote for Coles demerger

Wesfarmers shareholders have voted overwhelmingly to demerge Coles into a $20 billion standalone business. The decision means Coles should debut on the ASX next week.

Ninety-nine per cent of shareholders approved the demerger at a specially held vote after the Wesfarmers’ annual general meeting (AGM) on Thursday. The Perth-based conglomerate first mooted the demerger back in March this year. It bought Coles in 2007.

Subject to regulatory approval, the ASX will list Coles shares on November 21. It looks set to become a top-30 ASX-listed company to rival Woolworths, according to

‘Two businesses’

At the AGM, Wesfarmers Chair Michael Chaney said: “As shareholders, we will end up with separate interests in two businesses – a standalone Coles, and Wesfarmers without Coles.

“And both companies … offer attractive return profiles.”

Having already disposed of the Bunnings UK business, widely seen as a disastrous venture, Wesfarmers says the demerging of Coles will help shift investment towards businesses with higher potential for earnings growth in the future.

Coles’ post-demerger properties will include Bunnings in Australia, Kmart, Target and Officeworks.

Wesfarmers will retain a 15 per cent interest in the supermarket chain, however. It will distribute the remaining shares to Wesfarmers shareholders in proportion to the holdings they already have.

Hitting back at criticism

But the WA conglomerate faced immediate criticism for retaining this 15 per cent stake. And some commentators have suggested Coles won’t be able to pay franked dividends for two years.

But Wesfarmers Managing Director Rob Scott dismissed these claims as “factually wrong”. He said shareholders would receive dividends from Wesfarmers and Coles that would be the same as those Wesfarmers would have paid out if the companies hadn’t demerged.

“Coles will be a taxpayer,” he said. “They will pay a significant amount of tax that will enable Coles to pay a (full year) fully franked dividend.”

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