- Australian conglomerate Wesfarmers (WES) has agreed to sell 5.2 per cent of supermarket company Coles (COL)
- Because Wesfarmer's stake in the consumer goods giant has fallen below 10 per cent, the company will lose the right to nominate a director to Coles’ board
- The CEO of Wesfarmers explained that the last few weeks of COVID-19 uncertainty have highlighted the importance of having a flexible balance sheet
- Going forward, both companies will continue their flybuys loyalty joint venture
- Wesfarmers’ share price is up 2.51 per cent, trading for $36.79 per share
Australian conglomerate Wesfarmers (WES) has agreed to sell 5.2 per cent of the issued capital of Coles Group Limited (COL).
Because Wesfarmer's stake in the consumer goods giant has fallen below 10 per cent, the company will lose the right to nominate a director to Coles’ board.
As part of the sale, Wesfarmers has agreed to keep its remaining shares in Coles for at least 60 days after completing the deal. This agreement is subject to the customary exceptions.
The company cited the significant and unprecedented effects of the COVID-19 pandemic as contributing to the sales decision. In particular, it specified that the past few weeks have highlighted the importance of maintaining a flexible balance sheet.
COVID-19 has certainly changed the retail landscape this year, with most non-essential stores closing down on government orders. Supermarkets like Coles, however, have been flooded with extra business as people panic-buy and hoard food and other essentials.
According to company CEO, Robert Scott, Wesfarmers has been pleased with the performance of Coles since the demerger. He also said that the company values the important role that Coles will continue to provide to Australian households during the COVID-19 crisis.
“This divestment crystallises an attractive return for shareholders since demerger, and further enhances Wesfarmers’ strong balance sheet position,” Rob added.
Going forward, Wesfarmers and Coles will continue the flybuys loyalty joint venture, with each retaining 50 per cent interest in the business. This will allow for the continued strategic collaboration between the companies.
Wesfarmers’ share price is up 2.51 per cent, trading for $36.79 per share at 11:29 am AEDT.