Is Wesfarmers looking to sell off its remaining Coles shares?

Wesfarmers still owns a big pile of Coles shares, despite spinning out the company years ago.

| More on:

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The Wesfarmers Ltd (ASX: WES) share price has been on quite a pleasing run of late. In 2023 so far, Wesfarmers shares have risen by a healthy 7.4%. Over the past 12 months, the gains have been more muted, with Wesfarmers rising by just 2.3%.

But since the company reached its most recent 52-week low of just over $40 in June last year, Wesfarmers shares have appreciated by a significant 22%.

Long-term investors have done especially well out of Wesfarmers shares. Over the past five years, the Wesfarmers share price has risen by more than 65%. And since Wesfarmers' spin-off of Coles Group Ltd (ASX: COL) in November 2018, the company is up by around 55%:

Back in 2018, Wesfarmers announced that Coles would be flying the nest and listing on the ASX 200 in its own right. At the time, Wesfarmers investors received one share of Coles for every share of Wesfarmers share they owned.

This has proven to be a lucrative move for investors. Not only have Wesfarmers shares shot up in value since Coles left the building, but the Coles share price has also rocketed by more than 40% since the spin-off too:

That means investors who held on to both their Coles and Wesfarmers shares since then have done exceptionally well.

Not only have they enjoyed bumper capital gains on both companies, but Wesfarmers and Coles have also both upped their dividends substantially since the divorce.

At the time of the Coles spin-off, Wesfarmers actually retained around 15% of the company, listing the other 85% on the ASX. But over the last few years, Wesfarmers has pared back this stake.

Today, the company only retains a fraction of this original 15%, holding a stake that is worth roughly 2.8% of the entire market capitalisation of Coles.

a woman looks down at her phone with a look of concern on her face and her hand held to her chin while she seriously digests the news she is receiving.

Image source: Getty Images

Is Wesfarmers about to firesale its last Coles shares?

So could Wesfarmers offload this remaining stake in Coles and give its balance sheet a cash injection? Some investors might want the company to go down this path. Wesfarmers could use the funds for a new acquisition, or else bankroll a special dividend or share buyback program, after all.

Well, it's certainly a possibility. But one that won't be happening anytime soon, if new reporting is to be believed.

According to a report in the Australian Financial Review (AFR) this week, investment bankers regard the sale of this last remaining Coles stake as a done deal. It's just a matter of "when, not if, [the] former parent Wesfarmers will exit the supermarkets giant" completely, they say.

According to the report:

A couple of brokers were sniffing around the stake on Tuesday night, post Coles' interim result, to no avail. They reckon Wesfarmers doesn't need the cash, and is happy to sit and collect its Coles dividends until it finds a use of sale proceeds.

So it doesn't look like Wesfarmers is ready to part with its Coles shares just yet. But watch this space because there are apparently quite a few experts who think it's a done deal. Just not yet.

Motley Fool contributor Sebastian Bowen has positions in Wesfarmers. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has positions in and has recommended Coles Group and Wesfarmers. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Share Market News

5 mini houses on a pile of coins.
Opinions

2 ASX shares I'd much rather buy than an investment property

Certain ASX shares can offer exposure to real estate with more income potential.

Read more »

A man holding a cup of coffee puts his thumb up and smiles with a laptop open.
Broker Notes

Top brokers name 3 ASX shares to buy next week

Brokers gave buy ratings to these ASX shares last week. Why are they bullish?

Read more »

A man in a business suit rides a graphic image of an arrow that is rebounding on a graph.
Broker Notes

Down 43% this week, are Cochlear shares now the best bargain buy of the year?

A leading analyst believes the historic selloff in Cochlear shares could present a unique buying opportunity.

Read more »

A businessman wears armour and holds a shield and sword.
Share Market News

Nervous investors turn to ASX 200 defensives as global energy shock drags on

ASX investors sought safety in defensive sectors last week.

Read more »

A smiling woman at a hardware shop selects paint colours from a wall display.
Broker Notes

Wesfarmers shares: Buy, hold or sell?

A leading analyst delivers his verdict on Wesfarmers shares.

Read more »

An arrow crashes through the ground as a businessman watches on.
Share Fallers

After falling 43% in a week, are Cochlear shares now a buy?

Is this drop a warning sign?

Read more »

Businessman working and using Digital Tablet new business project finance investment at coffee cafe.
Broker Notes

Buy, hold, sell: Cochlear, CSL, and DroneShield shares

Are these hugely popular shares in the buy zone or not? Let's find out.

Read more »

Man holding out $50 and $100 notes in his hands, symbolising ex dividend.
Share Market News

How much do I need to invest in ASX shares to earn a $500 monthly passive income?

A $500 per month passive income is more achievable than you'd think.

Read more »