Coles vs. Woolies fight to become more intense

Wesfarmers is doing everything in his power to ensure the success of the Coles split by giving the supermarket chain the financial ability to compete more aggressively with his rival Woolworths

. earnings before interest and taxes of approximately $ 1.5 billion, annual dividends of approximately $ 800 to $ 900 million, net debt of approximately $ 2 billion and credit facilities not drawn from about 4 billion dollars.

had anticipated, which means that he is in a better position to renovate the stores and invest to make his supply chain more productive.

Rob Scott, Managing Director of Wesfarmers, revealed Monday that he would own 15% of Coles David Cheesewright, former CEO of Walmart International, is a new independent non-executive director of Coles. "width =" 620 "/>
            
        
    

Wesfarmers shareholders will receive one Coles share for each Wesfarmers share. Coles will then issue to Wesfarmers about 195 million shares, which will bring the company 's total capital to 1.3 billion shares.

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The split of Coles will offer investors a clear choice between the reborn Woolworths and Coles, a pur-play retailer and an alcohol company that raises its performance after several years of buoyant sales to the parity

The gap between Woolworths and Coles in terms of sales growth at constant scope has decreased. But Woolworths will maintain sales growth over Coles in 2019 and 2020 according to Craig Woolford, a Citi badyst.

Wesfarmers 'decision to place only $ 2 billion on Coles' balance sheet will have a better credit rating than Woolworths. 19659012] Better Positioned

Coles will also be better positioned to deal with lease accounting changes that will come into effect next year.

From 2019, Australian companies must bring the majority of operational leases to their balance sheets

Coles has total rental debts of about $ 9.5 billion, representing less than half of $ 20 billion operating lease debts from Woolworths.

Another factor that militates in favor of Coles is the shorter duration of its leases. Its average operating lease is 6.5 years, compared to more than three times that of Woolworths. This should give Coles greater flexibility in managing its stores.

The decision to maintain a high dividend payout ratio at Coles will appeal to retail investors. According to Wesfarmers, Coles will have a dividend payout ratio of 80 to 90%.

Asked by badysts on Monday, Scott and Wesfarmers chief financial officer Anthony Gianotti said Coles had a conversion rate well above 100%.

Gianotti said that the expected annual results in a few weeks would show that the conversion to Coles cash was over 108 percent in the year to June 30, 2018.

The new independent president of Coles will be old James Graham, director of Wesfarmers and majority shareholder of Gresham Partners

Scott defends the appointment of David Errington, Bank of America badyst Merrill Lynch

Scott explains that Graham is one of the best -qualified directors in Australia with retail experience thanks to his 20 years on the board of Wesfarmers, who owns Bunnings and Kmart.

Wesfarmers also named a world-leading retail expert, Dave Che eewright, to Coles' board of directors

Cheesewright, the former chief executive of international operations at Walmart Stores, the largest Brick and mortar retailer to the world, will bring a vast experience of digital retail

he was looking worldwide executives in the retail space to replace John Durkan as CEO of Coles .

This research ended with the appointment of Steven Cain, who was CEO of Metcash. Cain starts at Coles in September and Durkan stays with the company until June 1999.

The other directors of Coles are former Fonterra executive and McKinsey & Co counselor Jacqueline Chow and l & # 39; Former CEO of Foxtel, Richard Freudenstein. The company's market capitalization will depend on many factors, but the dismembered companies in Australia have a history of outperforming the companies that sell them. [[TRADUCTION]

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