Retail giant Wesfarmers has requested a trading halt pending an announcement on its planned $20 billion demerger of supermarket chain Coles.
On Friday morning, the Perth-based conglomerate requested a trading halt until Tuesday, or until it made an announcement about Coles.
In March, Wesfarmers announced its “once in a decade” move to spin off Coles Group, its largest division which it bought in 2007, and list it on the ASX.
Coles accounts for 60 per cent of the conglomerate’s employed capital, but only 34 per cent of earnings.
In August, the company said it would retain 15 per cent of Coles post-separation in order to facilitate growth initiatives and retain a strategic alignment, while also telling investors the sale would allow it to focus on generating cash for its leading stores moving forward.
Wesfarmers suffered a 58 per cent drop in FY18 net profit after taking more than $1.3 billion in costs and losses on its disastrous Bunnings UK exit and a $300 million writedown on underperforming Target.
“Following the decisive actions taken to address underperformance and reposition the Group’s portfolio, Wesfarmers is well placed to deliver sustainable growth in earnings and improved shareholder returns,” the company said in a statement.
Coles, which is expected to be spun off by November, recorded a 6.8 per cent drop in earnings to $1.5 billion for the last financial year.
The demerger will be effected by a scheme of arrangement, under which eligible shareholders will receive one Coles share for every Wesfarmers share held.
When the demerger was announced, Deustche Bank analyst Michael Simotas said it was a positive move.
He said it showed Wesfarmers managing director Rob Scott was taking an “active approach” to portfolio management.
The group recently proposed the appointment of three non-executive directors to complete the new board of Coles, adding to the four previously announced.
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