Wesfarmers plans split from Coles to create a new ASX giant

Wesfarmers (ASX: WES) has revealed plans to demerge its entire Coles division and turn it into a new company on the ASX.

The proposed demerger includes a national network of 806 Coles supermarkets, Coles Online, 894 liquor stores through Liquorland, Vintage Cellars and First Choice Liquor, 712 Coles Express outlets, Coles Financial Services and the chain of 88 Spirit Hotels.

While the split remains subject to shareholder and regulatory approvals, managing director Rob Scott says Wesfarmers' goal is to target higher returns from the remainder of its businesses which have stronger growth prospects.

"Wesfarmers acquired Coles as part of Coles Group in 2007 and since then has successfully turned around the business and restored its position as a leading Australian retailer," says Scott.

"We believe Coles has developed strong investment fundamentals and is of a scale where it should be operated and owned separately.

"It is now a mature and cash generative business, which is expected to have a strong balance sheet and dividend paying capacity.

"A demerger of Coles will facilitate greater focus by Wesfarmers on growth opportunities within its remaining businesses and the pursuit of value accretive transactions." Read more

Paris Faint - Business Insider Australia - 16 Mar 2018