Overview
What are the taxation implications of the Demerger for Wesfarmers Shareholders? | The general Australian taxation implications of the Demerger for Wesfarmers Shareholders are set out in Section 5 of the Scheme Booklet. The outline in Section 5 is general in nature and should not be relied upon as advice. The tax consequences for each shareholder may vary depending on individual circumstances. Accordingly, you are encouraged to seek your own professional advice as to the Australian and, if applicable, foreign tax implications of participating in the Demerger. Scheme Booklet section for more information - 5 |
How do I determine the cost base of the Wesfarmers and Coles shares? | You must apportion the cost base of your Wesfarmers shares just before the demerger between the Wesfarmers Shares and Coles shares held after the demerger (for those shareholders who hold Post-CGT Wesfarmers shares). The cost base appointment is based on the market values of the Wesfarmers shares and corresponding Coles shares just after the demerger. On 14 December 2018, The Australian Commissioner of Taxation has issued Class Ruling CR 2018/59 (Class Ruling) covering the Australian income tax implications of the demerger of Coles Group Limited (Coles) for shareholders of Wesfarmers Limited (Wesfarmers). Following the Class Ruling, Wesfarmers has prepared a tax information guide for Australian resident Wesfarmers shareholders. The purpose of this tax information guide is to set out how an Australian resident shareholder of Wesfarmers should allocate the capital gains tax cost base of their Wesfarmers shares between their Wesfarmers and Coles shares. This guide is available here and a copy of the ATO Class Ruling is available here. As indicated in the scheme booklet, it is recommended that all Wesfarmers shareholders consult with a professional tax advisor regarding the taxation implications of participating in the demerger given the particular circumstances that apply to them. |
What is the Demerger? | The Demerger is the separation of Wesfarmers’ Coles division to create an independent ASX-listed retail company with leading market positions in Australian supermarkets, liquor and convenience. Wesfarmers Shareholders retain their Wesfarmers Shares and Eligible Shareholders received one Coles Share for every Wesfarmers Share held at the Record Date. Scheme Booklet Section for more information - 1.1 |
Why was the Demerger proposed by the Wesfarmers Board? | The decision to demerge Coles followed a review of Wesfarmers’ portfolio and the composition of its capital employed. Scheme Booklet Section for more information - 1.1 |
What alternatives did the Wesfarmers Board consider? | The Wesfarmers Directors are of the view that the Demerger is more likely to enhance shareholder value in the long term than other available alternatives, including maintaining the status quo, undertaking an initial public offering of Coles, or a sale of Coles. Scheme Booklet Section for more information - 1.2 |
What is Coles? | Coles is a leading Australian retailer, providing customers with everyday products including fresh food, groceries, household goods, liquor, fuel and financial services. As at 30 June 2018, Coles processed more than 21 million customer transactions on average each week via its store network and online platform, had over 112,000 team members across all of its businesses and operated 2,507 retail outlets nationally. Coles’ key strengths include: The performance of Coles is subject to a number of risks., These risks include: These risks are described in further detail in Section 2.18. Coles has a number of strategies in place to mitigate these risks. Scheme Booklet Section for more information - 2 |
Why is Wesfarmers retaining a shareholding in Coles? | Wesfarmers has retained a minority ownership interest of 15 per cent in Coles following the Demerger to support strategic alignment and reinforce collaboration opportunities between Wesfarmers and Coles in relation to mutually beneficial growth initiatives, including in the areas of data, digital and loyalty. Scheme Booklet Section for more information - 1.1 and 3.1 |
What are Wesfarmers' intentions regarding its retained shareholding in Coles? | The ownership stake is important in reinforcing collaboration opportunities between Wesfarmers and Coles. Wesfarmers will retain its shareholding in Coles to the extent it is in the interests of Wesfarmers Shareholders to do so. There are no escrow or similar restrictions on the disposal by Wesfarmers of its 15 per cent shareholding. Scheme Booklet Section for more information - 1.1 and 3.1 |
What will the ownership structure of flybuys be post Demerger? | Wesfarmers and Coles continue to own 50 per cent of flybuys to support continued development of the loyalty program and better leverage the combined Coles and Wesfarmers digital and data assets to improve the companies’ respective customer offers. Scheme Booklet Section for more information - 2.5.4.1 and 3.1 |
What is Coles' strategy post the Demerger? | Coles’ strategic priorities are set out in Section 2.6. The Coles Board intends to continue to focus on these strategic priorities following the Demerger. Scheme Booklet Section for more information - 2.6 |
Advantages, disadvantages and risks of the Demerger | |
What are the advantages of the Demerger? | The key advantages of the Demerger include: These advantages, together with other advantages of the Demerger, are discussed in Section 1.3. |
What are the main disadvantages of the Demerger? | The key disadvantages of the Demerger include: These disadvantages, together with other disadvantages of the Demerger, are discussed in Section 1.4. |
What are the risks with respect to an investment in Coles? | Coles is subject to risks which may adversely affect its future operating or financial performance, or the investment return or value of Coles Shares. Many of these risks were existing business risks, to which Wesfarmers Shareholders were already exposed, while others arise out of, or increase as a result of, the Demerger. These risks are discussed further in Section 2.18. |
Coles after Demerger | |
When did Coles Shares start trading separately? | Coles Shares commenced trading on the ASX on 21 November 2018, initially on a deferred settlement basis. Scheme Booklet Section for more information - 4.7 |
In which stock market index will Coles be eligible for inclusion? | Upon implementation of the Demerger, it is anticipated that, based on free float market capitalisation, Coles will enter the S&P/ASX 50 index. However, no assurance can be provided that Coles will enter the index or will remain in the index in the future. Scheme Booklet Section for more information - 1.4.4 |
What additional ongoing costs will Coles have as a standalone listed company? | Coles is expected to incur incremental, net ongoing costs of approximately $28 million per annum as a standalone listed entity. These incremental, ongoing costs include, amongst other things, share registry costs, company secretariat costs, the cost of maintaining a separate board of directors, and the cost of services currently provided by Wesfarmers to Coles, such as statutory accounting, treasury, legal and taxation. In addition, annual costs of approximately $28 million per annum, largely related to group insurances and workers’ compensation self-insurance, which were previously incurred by Wesfarmers (but not on-charged to Coles) are expected to be incurred by Coles following the Demerger. Wesfarmers’ costs will reduce by this corresponding amount. Scheme Booklet Section for more information - 1.4.2 |
Coles after Demerger | |
What will Coles' dividend policy be? | Coles’ dividend policy will be determined by the Coles Board at its discretion and may change over time. The Coles Board intends to follow a dividend policy which has regard to current earnings and cash flows, available franking credits, future cash flow requirements and targeted credit metrics. As a result, Coles expects to distribute 80 to 90 per cent of underlying profit to its shareholders while retaining strategic flexibility. Wesfarmers intends to pay an interim dividend in March 2019 with reference to the five months of Coles earnings prior to the Demerger. Coles expects to pay its first dividend in September 2019, which will be a final dividend for the year ending 30 June 2019, with reference to the seven months of earnings post Demerger. It is anticipated that, taken together, the dividends to be declared by Coles and Wesfarmers for the year ending 30 June 2019 will be broadly equivalent to the dividends that Wesfarmers would otherwise have declared if the Demerger did not proceed (including in respect of franking). Coles will distribute dividends with the maximum practicable franking credits for the purposes of the Australian dividend imputation system. No assurance can be given in relation to the level of future dividends or the franking of such dividends (if any), as these will depend on future events and circumstances. The extent to which a dividend can be franked will depend on Coles’ franking account balance (which immediately following the Demerger will be nil). Coles’ franking account balance will depend on the amount of Australian income tax paid by Coles following the Demerger. Franking credits are generated through the payment of income tax, and Coles is expected to pay monthly income tax instalments. Scheme Booklet Section for more information - 2.13.16 |
What will Coles’ capital structure be? | On implementation of the Demerger, Coles will have net debt of approximately $2.0 billion. Coles’ balance sheet is expected to support strong investment grade credit ratings. Coles will have committed bank facilities of $4.0 billion. See Section 2.13.10 for further details. Coles will only have ordinary shares on issue and no other equity securities at the time of Demerger. |
Who will be on the senior leadership team of Coles? | Following the Demerger, the Coles senior leadership team comprises: • Steven Cain –Chief Executive Officer Scheme Booklet Section for more information - 2.10.2 |
Who will be on the Coles Board? | Following the Demerger, the Coles Board comprises eight directors: • James Graham AM – Chairman Scheme Booklet Section for more information - 2.10.1 |
What commercial arrangements do Wesfarmers and Coles have with each other following the Demerger? | Wesfarmers and Coles have entered into a Transitional Services Agreement to formalise the terms upon which Coles will provide a number of information technology, payroll, finance and other services to Kmart, Target and Officeworks, and for Wesfarmers to provide Coles with workers compensation claims management, insurance and lease management services. Coles and Wesfarmers will provide the relevant services for a transitional period following the Demerger, pending migration of those services, or the replication of the relevant services by, Coles, Kmart, Target and Officeworks. See Section 4.9.5 for further detail. In addition to the flybuys joint venture, Coles has entered into ongoing contractual agreements with Kmart, Target and Officeworks for the provision of payment acquiring services and for the provision of gift card services. For shared sites, Coles will enter into subleases and agreements for shared services and utilities with Kmart and Target. See Section 4.9.6 for further detail. Scheme Booklet Section for more information - 4.9.5 and 4.9.6 |
When will Coles release its first results as a standalone company? | Half year results ending 31 December 2018 will be reported in February 2019, with first full year results as at 30 June 2019 to be reported in August 2019. |
Wesfarmers after Demerger | |
Does Wesfarmers own any Coles Shares after the Demerger? | Yes. Wesfarmers continues to own a shareholding of 15 per cent in Coles after the Demerger. Scheme Booklet Section for more information - 1.1, 3.1 and 4.9.7 |
In which stock market index will Wesfarmers be eligible for inclusion? | Upon implementation of the Demerger, it is anticipated that Wesfarmers will remain in the S&P/ASX 50 index. However, no assurance can be made that Wesfarmers will remain in the index upon Demerger or continue to be the index in the future.be eligible for inclusion? Scheme Booklet Section for more information - 1.4.4 |
What is Wesfarmers’ strategy post the Demerger? | Wesfarmers’ primary objective remains to provide a satisfactory return to Wesfarmers Shareholders over the long term. This will be achieved through four overarching strategies: Scheme Booklet Section for more information - 3.4 and 3.5 |
What businesses will Wesfarmers own following the Demerger? | Following the Demerger, Wesfarmers has a portfolio of cash generative businesses with strong market positions in growing markets. Wesfarmers comprises the Bunnings, Kmart Group and Officeworks retail divisions and the Industrials division with businesses in chemicals, energy and fertilisers, and industrial and safety products. In addition, Wesfarmers will hold a number of non-controlling ownership interests, including in Coles, flybuys, BWP Trust, and Gresham Partners. Scheme Booklet Section for more information - 3.3 |
Who will be on the Wesfarmers Board after the Demerger? | Following the Demerger, the Wesfarmers’ Board comprises eight directors: Scheme Booklet Section for more information - 3.7 |
Who will be on the senior leadership team of Wesfarmers? | Following the Demerger, Wesfarmers’ senior leadership team will comprise: |
What is the impact of the Demerger on Wesfarmers’ dividends? | Wesfarmers’ dividend policy does not change as a result of the Demerger. In considering dividends, the Wesfarmers Board has regard to available franking credits, current earnings and cash flows, future cash flow requirements and targeted credit metrics. It is anticipated that, taken together, the dividends to be declared by Coles and Wesfarmers for the year ending 30 June 2019 will be broadly equivalent to the dividends that Wesfarmers would otherwise have declared if the Demerger did not proceed (including in respect of franking). Scheme Booklet Section for more information - 3.6 |
Implementation and process | |
What were the mechanics of the Demerger? | To implement the Demerger, Wesfarmers has undertaken a Capital Reduction and Dividend, the proceeds of which were automatically applied to the acquisition of Coles Shares by or on behalf of Wesfarmers Shareholders. Eligible Shareholders received one Coles Share for every Wesfarmers Share held at the Record Date. Following the Demerger, Wesfarmers Shareholders at the Record Date held 85 per cent of the Coles Shares on issue, with the remaining 15 per cent of the Coles Shares to be held by Wesfarmers. Scheme Booklet Section for more information - 4 |
What is the Capital Reduction? | The Capital Reduction will permit Wesfarmers to reduce its share capital on the Implementation Date. The Capital Reduction Amount was not be paid in cash to Wesfarmers Shareholders. The Capital Reduction Amount was applied (together with the Dividend Amount) on behalf of Wesfarmers Shareholders as consideration for the transfer of Coles Shares under the Scheme. Scheme Booklet Section for more information - 4.4 |
What were the key steps to implement the Demerger? | At the First Court Hearing on 5 October 2018, Wesfarmers obtained an order from the Court to convene the Scheme Meeting. The key remaining steps to implement the Demerger were: approval of the Capital Reduction by Wesfarmers Shareholders at the General Meeting; approval of the Scheme by Wesfarmers Shareholders at the Scheme Meeting; Court approval of the Scheme at the Second Court Hearing; lodgement of the Court order with ASIC which will cause the Scheme to become Effective; completion of the Corporate Restructure; approval of admission of Coles to the Official List of the ASX and the official quotation of Coles Shares by the ASX; and Eligible Shareholders (other than Selling Shareholders) receiving Coles Shares by way of the implementation of the Scheme. Coles Shares start to trade separately on the ASX from 21 November 2018, initially on a deferred settlement basis. Trading on the ASX of Coles Shares on normal settlement basis will commence on 29 November 2018. Sections 4.1, 4.2 and 4.3 contain further details of the Demerger, including a description of the approval thresholds and other conditions that must be satisfied or waived for the Demerger to proceed. |
Voting on the Demerger | |
| What were the voting thresholds? | Capital Reduction
Termination Benefits Resolution
Scheme Booklet Section for more information - 12 |
Other information | |
| If you have further questions | If you have any further questions, you should: |