Sarah FalsonInvestors in Coles Group Limited will today vote on a proposal by chairman, Rick Allert, to enable Wesfarmers to acquire the Group under a Scheme of Arrangement which will see Coles Group shareholders receive cash for their shares, along with shares in the newly-converged Wesfarmers.
“Under the Scheme of Arrangement being put to you today, you will be entitled to receive as consideration for each Coles Group share: $4.00 cash; 0.14215 Wesfarmers’ Ordinary Shares; and 0.14215 Wesfarmers’ Partially Protected Shares,” said Allert.
Shareholders will also be entitled to receive the Coles Group fully franked final dividend of $0.25 per share.
According to Allert, an independent expert, Grant Samuel, concluded that the Wesfarmers’ proposal was in the best interests of Coles Group shareholders in the absence of a superior proposal.
Samuel pointed out that shareholders will have a 44 per cent economic interest in the Wesfarmers merged group; the Wesfarmers’ proposal was the outcome of an extensive worldwide sale process and was the only firm offer for all of Coles Group; and that continued ownership uncertainty was likely to be damaging for Coles Group, particularly its supermarkets.
The Coles Board is therefore today unanimously recommending that shareholders vote in favour of the Scheme of Arrangement for the following reasons:
– the Independent Expert has concluded that the Scheme is in the best interests of shareholders in the absence of a superior proposal
– the Scheme allows shareholders to retain exposure to potential operational upside in the Coles Group businesses, with Coles’ shareholders owning approximately 44 per cent of the combined Wesfarmers and Coles Group
– as a holder of Wesfarmers Partially Protected Shares shareholders will receive a level of downside protection on your shareholding in Wesfarmers
– shareholders will become a shareholder in Wesfarmers, a company that has a track record of strong financial and operational performance
– as a new Wesfarmers’ shareholder, investors should receive a significant dividend uplift
– many shareholders will be eligible to receive Capital Gains Tax roll-over relief on the share consideration component of the offer
– if the scheme does not proceed, the Coles Group share price is likely to fall
“We believe the process has secured for you, our shareholders, an acceptable and respectable outcome despite a number of complex challenges,” said Allert today.
“If the Scheme is approved by shareholders today, the Company will seek the final approval of the Supreme Court on Friday November 9, which, if granted, will also be the last day of trading of Coles Group shares.”
Allert’s speech follows a year of turmoil for the supermarket retailer which saw its Bi-Lo outlets rebranded to Coles in a “poorly executed Bi-Lo conversion program,” according to Allert.
“Regrettably, while great care was taken in preparing the financial forecasts we had given to the market, on 23 February, 2007 – to the justifiable disappointment of you, our shareholders – we were required to revise our earnings guidance for FY08 to take account of the anticipated impact on Group earnings of a lower sales base in Supermarkets.
“Our revised earnings guidance was for 2008 earnings to grow by approximately 20 percent, rather than the 30 percent we had forecast in September 2006.”