The diversified conglomerate Wesfarmers has reached an agreement with the board of Australian retail group Coles for a recommended cash and share takeover offer totalling around A$22bn (US$17.7bn).
The offer comprises $4.00 in cash and 0.2843 of a share in Wesfarmers for each Coles share. Wesfarmers said that based on the closing price of $45.73 on 29 June, the offer values each Coles share at $17.25, inclusive of a final dividend of 25 cents per share. That represents a 7% premium to Coles’ latest closing price.
The Coles board unanimously recommended the offer and agreed to vote their shares in favour of the takeover. The deal is expected to be completed by October 2007.
Wesfarmers said investors in the combined company would “participate in the substantial benefits and uplift in earnings expected to flow as the planned Coles simplification, transformation and revitalisation programmes take effect”.
“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,” said Wesfarmers managing director Richard Goyder. “With the resolution of the ownership issue now in prospect, employees will be better able to focus on their key task of improving business performance in a very competitive marketplace.”
Goyder added that he believed it was important that this deal allowed Coles to remain an Australian company.
“There is a lot of work to be done to restore Coles to its rightful position in Australian retail but, from the outset, our interest in this opportunity has never waivered from the view that this is a very substantial and attractive addition to the Wesfarmers business,” Goyder said.
Wesfarmers emerged recently as the front-runner in the race to acquire Coles, which operates 3,000 supermarkets, as well as discount stores and an office supply chain, after other private equity bidders dropped out.
The deal will make the diversified conglomerate, which already operates the country’s largest DIY chain, Australia’s largest retail concern. The takeover itself will also be the largest in Australian corporate history.