Investors support Wesfarmers offer

Wesfarmers Ltd won approval for its A$19.7 billion ($18.5 billion) offer for Coles Group Ltd as shareholders bet the new owner can reverse a two-year decline in sales growth at Australia's second-largest retailer.

More than 99 percent of votes cast at a meeting approved the bid, surpassing the 75 percent threshold required, Melbourne-based Coles said in a statement yesterday.

The record Australian takeover won support after Perth-based Wesfarmers promised to bolster the bid if its stock fails to rise.

The agreement ends 15 months of tussling for control of Coles, which twice rejected cash offers from buyout firms led by Kohlberg Kravis Roberts & Co. Wesfarmers now faces the challenge of reversing a period of falling earnings and stalling sales at Coles that allowed larger rival Woolworths Ltd to extend its lead in revenue and profitability.

"Wesfarmers plans to win back the ground it lost to Woolworths, something Coles hasn't been able to do," said Tony Pearce, who helps manage the equivalent of $3.5 billion at Legg Mason Asset Management in Melbourne, including Coles stock.

"They will be getting a great deal if they can make it work."

The takeover requires approval from the Supreme Court of Victoria state, with a hearing scheduled for tomorrow. Ratification is considered a formality, Pearce said.

Wesfarmers, which owns Australia's biggest home-improvement chain, plans to spend A$5 billion to revive sales at Coles 3,000 supermarkets, Kmart discount department stores and Officeworks stationery outlets.

Coles' shareholders will get A$4 in cash, a 25-cent dividend and 0.2843 Wesfarmers stock for every share held. Half the shares will be ordinary Wesfarmers stock, and the other half so-called price-protected shares.

Bloomberg News

(China Daily 11/08/2007 page16)