Wesfarmers (ASX: WES), owner of big-box hardware retail chain Bunnings, has announced the sale and leaseback of 10 Bunnings properties to the BWP Trust (ASX: BWP) for $271 million.
BWP was originally set up by Wesfarmers in 1998 to allow Bunnings to spin off a number of its warehouse retailing properties — Wesfarmers still owns 23.5% of the Trust. Given the potential to boost shareholder value, it makes sense for Wesfarmers to utilise a sale and leaseback structure to allow the freeing up of capital. In this particular case Bunnings Managing Director Mr John Gillam has highlighted the size of the new store roll-out occurring over the next 36 months which no doubt requires significant funds.
Of particular interest was Wesfarmers' announcement that it was in advanced discussions with other parties that could "result in a separate transaction involving a Bunnings portfolio of freehold properties to release further capital from Wesfarmers' balance sheet." The release went on to state that the other potential transaction is expected to have a "headline value that is slightly larger" than this announced BWP transaction.
It is perhaps surprising that the next transaction won't involve BWP however given the size of the current transaction, given BWP has a market capitalisation of $1.3 billion, it is perhaps understandable. Indeed to complete this acquisition BWP has announced a $200 million entitlement offer, of which Wesfarmers has said it will take its full allocation.
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Motley Fool contributor Tim McArthur does not own shares in any of the companies mentioned in this article.
