On Friday, October 5, Wesfarmers released over 200 pages of documents related to its proposed $20 billion demerger of Coles, after the Supreme Court of Western Australia ordered a shareholder vote on the matter.
If shareholders approve the plan, which is also subject to court and regulatory approvals, Coles will commence trading as one the 30 largest listed companies in Australia on November 21.
The documents revealed several key pillars that Coles said would position the business for success over the next decade, including a focus on fresh food and own brand products, continued investment in everyday low prices, growth of online and click and collect offers and more tailored stores based on data.
Coles also revealed an agreement with Witron Australia, a subsidiary of Witron Logistik + Informatik, to develop two new automated distribution centres (DCs) in Queensland and NSW over the next five years.
The documents did not state how much the DCs would cost to build, though Coles said its capital expenditure guidance of $600-800 million for FY19 includes the project and it would recognise provisions of $130-150 million due to redundancies and lease exits resulting from a handful of soon-to-be obsolete DCs.
Nevertheless, analysts have jumped on the approximated cost of the DCs as a potential financial bottleneck for the new company. Bank of America Merrill Lynch analyst David Errington said spending on the DCs could surpass $1 billion and would make it difficult for Coles to deliver on its target dividend payout ratio of 80-90 per cent.