Ahead of its 2017-18 annual results, due out tomorrow, Wesfarmers has revealed plans to sell its Kmart Tyre and Auto Service (KTAS) business to Germany’s Continental for $350 million.
The sale of KTAS, which has 258 stores across Australia and more than 1200 staff, is expected to be completed this quarter, subject to competition and foreign investment approvals.
Wesfarmers managing director Rob Scott said in a statement the deal crystallised value for shareholders from the business turnaround since it was acquired as part of the Coles Group in 2007.
“We believe that the divestment is in the best interests of Wesfarmers’ shareholders, while giving the employees and customers of KTAS the opportunity to join a highly complementary business in Continental,” Mr Scott said in a statement.
Continental is based in Germany. Its five divisions in 2017 generated sales of €44 billion and it currently employs more than 243,000 people in 60 countries.
Continental’s Tire division is a technology leader in tyre production and offers a broad product range for passenger cars, commercial vehicles and two-wheelers. Its product portfolio also includes fleet applications, as well as digital management systems for commercial vehicle tyres.
Wesfarmers said it expected to report a pre-tax profit on the sale of about $270 million to $275 million. That will appear in the half year results for December 31.
Wesfarmers shares eased 0.18% to $50.29.
It is the second asset sale to be revealed by Wesfarmers in the past week. On August 7 it revealed that New Hope (part of the Washington H. Soul Pattinson and Brickworks group of companies) had agreed to pay $860 million for 40% of the Bengalla thermal and soft coking coal mine in the NSW Hunter Valley.
The final deal and the share of the ownership of Bengalla won’t be known until the attitude of the other shareholders to their pre-emptive rights are known. Those are Mitsui of Japan and Taipower of Taiwan.
New Hope paid Rio Tinto $US660 million ($A867 million) back in September 2015 for its first 40% stake.
