Where next as Wesfarmers cuts its stake in Coles
As Wesfarmers further reduces its position in Coles, we examine the consequences and the investor response.
As news began to circulate that Wesfarmers (WES) would be further reducing its stake in Coles Group (COL), the share prices of both companies traded in a volatile fashion at the start of the week.
Coles was the worst hit, with its stock finishing out Tuesday’s session almost 10% lower – at $15.16 per share. Wesfarmers fared a shade better, though its stock still declined by 4.51% yesterday – closing out the session at $34.27 per share.
Both stocks however rebounded strongly on Wednesday, with Coles rising 4.42% while Wesfarmers gained 4.11%.
Particulars of the deal
On Monday, Wesfarmers revealed that it would be selling a further 5.2% of its stake in Coles Group – reducing the conglomerate’s holdings in the supermarket to just 4.9%.
This comes after Wesfarmers had already reduced its stake in Coles by 4.9% in mid-February – through a block trade handled by Macquarie Capital and UBS.
Ultimately, this latest sale represents a move aimed at shoring up the conglomerate’s balance sheet amidst elevated levels of uncertainty, with Wesfarmers noting that the share sale ‘crystallises an attractive return for shareholders.'
Indeed, between its spin-off from WES and its 2020 peak, the Coles share price has performed strongly, rising as much as 40% in that period.
Commenting on the broad strokes of this latest sell-down, Wesfarmers Managing Director said:
'We have been pleased with the performance of Coles since the demerger and the very important role that Coles is providing, and will continue to provide, to Australian households during the COVID-19 crisis.’
WES indicated that it has no intention to further reduce its stake in Coles Group within the next 60 days.
Wesfarmers & Coles share prices: the consequences
Centrally, with the Wesfarmers stake in Coles now dropping below 10% – the relationship deed established at the time of the Wesfarmers-Coles demerger will be terminated. One consequence of this entails that ‘Wesfarmers will no longer have the right to nominate a director to the Coles Board,’
For example, it was noted that David Cheesewright 'will continue as a director of the Coles Board, although he will no longer be a Wesfarmers nominee.'
Strategic initiatives – such as the Coles-Wesfarmers flybuys join venture will also be maintained.
IGA, may distribute information/research produced by its respective foreign affiliates within the IG Group of companies pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the research is distributed in Singapore to a person who is not an Accredited Investor, Expert Investor or an Institutional Investor, IGA accepts legal responsibility for the contents of the report to such persons only to the extent required by law. Singapore recipients should contact IGA at 6390 5118 for matters arising from, or in connection with the information distributed.
The information/research herein is prepared by IG Asia Pte Ltd (IGA) and its foreign affiliated companies (collectively known as the IG Group) and is intended for general circulation only. It does not take into account the specific investment objectives, financial situation, or particular needs of any particular person. You should take into account your specific investment objectives, financial situation, and particular needs before making a commitment to trade, including seeking advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit.
No representation or warranty is given as to the accuracy or completeness of this information. Consequently, any person acting on it does so entirely at their own risk. Please see important Research Disclaimer.
Please also note that the information does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. Any views and opinions expressed may be changed without an update.
Seize a share opportunity today
Go long or short on thousands of international stocks.
- Increase your market exposure with leverage
- Get spreads from just 0.1% on major global shares
- Trade CFDs straight into order books with direct market access
Live prices on most popular markets
- Forex
- Shares
- Indices
See more forex live prices
See more shares live prices
Prices above are subject to our website terms and agreements. Prices are indicative only. All shares prices are delayed by at least 15 mins.
See more indices live prices
Prices above are subject to our website terms and agreements. Prices are indicative only. All shares prices are delayed by at least 20 mins.