July 02, 2007 03:45pm
WESFARMERS has agreed to buy retail giant Coles in a huge $22 billion takeover, Australia's biggest takeover yet, which effectively gives Coles shareholders $17.25 a share.
Coles today said it would recommend the bid in the absence of a superior offer.
Wesfarmers is offering $4 cash per share plus 0.2843 Wesfarmers shares. The company expects the sale to be completed in October 2007. Coles shares last traded at $16.12.
The planned takeover would result in Wesfarmers' becoming the biggest retailer in Australia and the largest private sector employer.
"The Coles board has unanimously recommended the transaction ... in the absence of a superior proposal and subject to an independent expert determining that the proposal is in the best interests of Coles shareholders,'' Wesfarmers said.
Based on Wesfarmers closing price of $45.73 on Friday, the offer values each Coles share at $17.25 per share inclusive of a final dividend of 25 cents per share.
Coles chairman Rick Allert said the sale followed a comprehensive ownership review.
"This is a good outcome for Coles shareholders which recognises the significant turnaround of the company over the past five years and the future opportunity of the company’s new growthstrategy,” Mr Allert said.
“It provides an attractive premium now, as well as an opportunity to share in the future value upside from Coles businesses as part of the broader Wesfarmers group."
Managing Director Richard Goyder said Wesfarmers looked forward to completing the sale process as quickly as possible.
“The recommendation from the Coles board is a big step towards helping end the uncertainty for shareholders, employees, suppliers and customers surrounding the company’s ownership review,” he said.
“It is an opportunity for current shareholders to retain an ongoing interest in this important Australian company, for Coles to remain an Australian-owned company and for employees and consumers to benefit from a revitalised major force in the national retail sector," he said.
Both companies are in a trading halt, tying up some loose ends after Wesfarmers’ private equity partners quit the deal on Friday and the Perth-based conglomerate decided to go it alone.
The Wesfarmers board met on Friday night after a global tightening in debt markets in recent weeks resulted in European private equity partner Permira pulling out.
The board decided to proceed with a 100 per cent Wesfarmers bid, which was presented to Coles on Saturday morning.
While private equity players have been hampered by a higher cost of debt, Wesfarmers’ cost of capital has lowered due to its rising share price.
The main driver of that has been an improved outlook for its coal operations.
Wesfarmers is likely to position Coles’ office supplies business Officeworks alongside its Bunnings hardware business.
Target and K mart will form their own, separate discount apparel group, and the Coles supermarkets business will be a third, standalone operation.
An international search is believed to be under way for a new supermarkets boss, with discussions having already started with a number of candidates.
- with AAP and The Australian
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Geez, Wesfarmers are buying everything!! From Insurance Companies & Brokerages to Bunnings and now Coles Myer! I wonder whats next!Posted by: Turgs of London 4:43am today
At least it still remains in Australian hands.Posted by: Daniel B of Melbourne 9:32pm July 02, 2007
I can't wait show me the money they can have our 2500Posted by: Mike of Adelaide 7:43pm July 02, 2007
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now a formidable force that can not only dominate the australian retailer market but also take on the world.Posted by: Andrew 6:39pm July 02, 2007
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