Wesfarmers sells 5.2% of Coles Group

By Trevor Hoey. Published at Mar 31, 2020, in Market Wrap

Wesfarmers (ASX:WES) announced on Tuesday morning that trades had been executed for the sale of 5.2 per cent of the issued capital in Coles Group Limited (ASX:COL) for total pre-tax proceeds of $1,060 million.

Management had flagged the sale on Monday in response to a trigger built into the terms of Coles demerger from the Wesfarmers Group.

Specifically, Wesfarmers said, ‘’As a result of the Group’s interest falling below 10 per cent, the Relationship Deed agreed with Coles at the time of the demerger will terminate and Wesfarmers will no longer have the right to nominate a director to the Coles Board.

‘’As part of the transaction, Wesfarmers has also agreed to retain its remaining shares in Coles for at least 60 days from completion of the sale, subject to customary exceptions.’’

Wesfarmers managing director Rob Scott said that the significant and unprecedented events of the past few weeks have highlighted the importance of balance sheet flexibility to support the group in a range of economic circumstances.

He said he was pleased with the performance of Coles since the demerger and the very important role that Coles is providing, and will continue to provide, to Australian households during the COVID-19 crisis.

Wesfarmers reaps $130 million pre-tax profit

But at the end of the day, this was all about maximising shareholder returns for Wesfarmers as the divestment crystallises an attractive return for shareholders since the demerger and further enhances the group’s strong balance sheet position.

The sale will proceed at $15.39 per share in Coles with settlement expected on April to 2020.

This represents a significant discount to yesterday’s closing price of $16.82.

Wesfarmers expects to recognise a pre-tax profit on sale of approximately $130 million.

Following the sale, Wesfarmers retains a 4.9 per cent interest in Coles and has agreed to retain its remaining shares in Coles for 60 days from completion of the sale, subject to customary exceptions.

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