Supermarket giant to list as Coles refocuses
Wesfarmers plans to spin off supermarket giant Coles and create a separately listed business that would rank among the 30 biggest on the Australian stock market.
The Perth-based conglomerate plans to retain a 20 per cent stake in the new business, and managing director Rob Scott said the move would allow it to focus on its other businesses and give it the capacity to make future acquisitions.
Coles accounts for 34 per cent of Wesfarmers’ earnings but 60 per cent of its employed capital.
‘‘A demerger of Coles will facilitate greater focus by Wesfarmers on growth opportunities within its remaining businesses and the pursuit of value accretive transactions,’’ Scott said.
‘‘The capacity to act opportunistically will be retained through a strong balance sheet and a cash generative portfolio.’’
Metcash supermarkets chief executive Steven Cain will replace John Durkan as managing director of Coles, with the demerger and listing set for completion in the 2019 financial year, subject to shareholder and regulator approval.
Coles has been outpaced by Woolworths in food sales growth as its rival supermarket giant slashed prices over the past three years, but Scott said Coles still represented an attractive investment.
The spin-off would include 8061 supermarkets, Coles Online, 8941 Liquorland, Vintage Cellars and First Choice Liquor stores, 7121 Coles Express fuel and convenience stores, a general insurance and credit cards business, and 881 Spirit Hotels.
Wesfarmers would be left with its Bunnings hardware stores, Target, Kmart, Officeworks and an industrials portfolio.
It is mulling a possible exit from Bunnings in the UK and Ireland after its venture into overseas markets led to A$1.023 billion (NZ$1.09b) of impairments and an 86.6 per cent drop in first-half profit.