All being well Coles Group will cease to exist as a listed company after this Friday after shareholders yesterday voted overwhelmingly in favour of the $20 billion takeover offer from Wesfarmers.
Shareholders supported a scheme of arrangement to facilitate the merger, subject to approval being granted by the Supreme Court of Victoria.That is expected today or tomorrow.
That is expected and by the end of the week and all being well, Coles Group will be delisted and swallowed by Wesfarmers on November 23, with the restoring and revamp of the country's second and lagging retailer, schedule to start from then.
Some significant changes will happen: Officeworks stores will start appearing next to Bunnings stores where that is possible. Coles, Kmart and Target (plus Bi Lo and the liquor businesses) will undergo makeovers and changes in pricing.
The men behind Bunnings hardware chain will be running the show.
And rivals like Woolworths and Metcash's IGA chain will attack and counter-attack on price to try and steal business from Coles supermarkets and liquor while the changes happen.
Some 99.25% of votes were cast in favour and some 97.83% of shareholders voting in person or by proxy voted in favour, Coles said to the ASX.
It was a big show of support from a shareholder group who realised it had run out of alternatives. Private equity had come and was rejected, twice, or three times if you think the way the KKR-led group melted away as the subprime mortgage crisis bit and credit freeze spread in August.
The independent exports report pointed out that while the bid was sort of OK, it could have been better, but there was no one around to force a better offer from anyone bar Wesfarmers.
Wesfarmers had to sweeten the terms of the offer remember to allow shareholders to take a mixture of shares that are sort of underwritten at a fixed return in the future, unfixed shares and cash.
The mixture of shares to cash was boosted to favour shares to lessen the tax problems for Coles shareholders.
Addressing a shareholder meeting in Melbourne yesterday to vote on the proposal, Coles chairman Rick Allert said all the retailer's businesses were performing to budget in the first quarter of the 2008 financial year.
"Your board expects that over the next few years, shareholders in the expanded Wesfarmers' group will reap the significant financial upside of the investment made to date in both transformation and simplification of the Coles businesses,'' Mr Allert said.
"All of our businesses have clear growth strategies.
"We are pleased that all businesses, including Supermarkets, are on budget after the first quarter of this financial year.'' Just what the budget was shareholders were not told.
Was it the old, discredited budget of the Coles management team of CEO John Fletcher, or was it an updated strategy that meets the approval of Wesfarmers?
Mr Allert said the current value of the offer was $16.03 a share – about 48% above where the Coles share price was before the company was first approached in August, 2006, by the KKR consortium. That was after the price was hammered lower after it became clear the company's operations were not doing well.
Coles attempts to remain independent with a revamped strategy were announced just over a year ago but lasted only until February this year when the board and management threw in the towel after it became clear the strategy to revamp the low cost Bi Lo chain had failed, with a sharp loss in sales and earnings.
The earnings and sales targets for the next few years were abandoned and the 2007 profit was downgraded to no real change. It came in under the estimate of around $787 million when one off factors were taken out.
KKR and other private equity groups made two passes at Coles and were rejected both times, but some private equity buyers continued to hang around in competition with Wesfarmers while rival Woolworths tried to act as a spoiler, insisting it might bid for some assets or try and buy them from Coles or Wesfarmers.
That attempt faded after the ACCC ruled out WOW buying Officeworks and Target together.
Mr Allert told the meeting that if the scheme was approved shares in the company would stop trading this Friday, November 9, pending the approval of the Supreme Court.
New Wesfarmers shares would begin trading on Monday November 12, and the company would officially own Coles on November 23.
"Wesfarmers will pay shareholders the $4.00 cash consideration under the scheme on 23 November 2007,'' he said.
"On this same day, the Coles final dividend of 25 cents per share will also be paid.''
Woolworths' shares were up 82 cents at $33.17 at the close.
Wesfarmers' shares were up 41 cents at $42.92 and Coles shares rose 22 cents to $15.94.
