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Wesfarmers To Demerge Coles

Retail conglomerate Wesfarmers will demerge Coles in a plan to create a new top 30 company on the ASX which will have “leading positions in grocery, liquor and convenience”.

The company is implementing the demerger so it can focus on growing its other divisions including Bunnings, Target, Kmart and Officeworks.

Wesfarmers explains if the demerger goes ahead shareholders will receive new shares in Coles proportional to their existing shareholdings. The distribution of Coles shares expected to qualify for demerger tax relief which will be subject to ATO ruling.

In its presentation, Wesfarmers tell shareholders they have the opportunity to vote on the demerger and if its approved, will be completed by FY19.

Wesfarmers will retain a minority ownership interest up to 20 per cent in Coles and a substantial ownership stake in flybuys.

Currently, Coles accounts for 60 per cent for the Wesfarmer group’s capital employed and 34 per cent of group divisional earnings.

Last month it released its half year results with a massive 86.6 per cent drop in profit to $212m with its EBITDA dropping 42.5 per cent to $1.76bn.

Wesfarmers claims these results are a reflection of difficult trading conditions, including a $306m writedown of Target and $931m writedown of Homebase/Bunnings UK and Ireland.

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