Wesfarmers Limited · ASX:WES
Wesfarmers — Merger or Acquisition (July 2007)
34 slides from Wesfarmers's merger presentation, Jul 2, 2007
Slide 1: iia
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Slide 2: Agenda
Agenda Offer Overview Richard Goyder Supermarkets, Liquor & Convenience John Gillam Big Box Retailing John Gillam Discount Department Stores John Gillam Structure, Funding and Process Gene Tilbrook Benefits for Stakeholders Richard Goyder Questions All
Slide 3: Offer Overview
iy i Offer Overview Richard Goyder Managing Director A 4 Westarmers
Slide 4: Benefits to Shareholders
Benefits to Shareholders * NPV of Coles is value accretive to our shareholders * Opportunity to acquire iconic Australian company with quality assets * Performance improvement initiatives in Supermarkets and Kmart to provide value uplift in the medium term * Target and Officeworks are well performin
Slide 5: Key Offer Terms
Key Offer Terms « For every Coles share: 0.2843 Wesfarmers shares + $4.00 cash * Coles shareholders to receive a final, fully franked dividend of 25 cents per share * Offer values Coles at: — $17.25 per share or $17.00 per share excluding the final dividend’; or — $16.55 per share or $16.80 per shar
Slide 6: Background
Background « In April, Wesfarmers acquired voting power over a 12.6% stake in Coles * Due diligence commenced on 25 May « Volatile US debt markets resulted in our original private equity-style approach no longer being considered optimal « 100% Wesfarmers backed final offer was made on 30 June * Reco
Slide 7: Strategic Rationale
Strategic Rationale Iconic Australian business in attractive markets with quality assets and significant growth opportunities Compelling opportunity to establish Australia’s premier retailing operations ~— Extensive store portfolio with leading market positions ~— Businesses operate in attractive ma
Slide 8: Wesfarmers' Track Record
Wesfarmers’ Track Record Wesfarmers total shareholder return « $8.9b annual revenue, $1.66 annual EBITDA ° $6 + $18b Market Capitalisation, “ investment grade S&P rating 2 ° Proven track record of acquisition on Jan Jan Jan Jan Jan Jan van Jan Jan Jan . a a a a; nd value creation Assumes reinvestmen
Slide 9: Valuation
Valuation « Acquisition meets Wesfarmers’ investment criteria * Consistent DCF valuation approach used « Investment exceeds our hurdle rate excluding synergies * Franking credits will allow dividend payout in excess of EPS for several years * Transformation and simplification FY08-FY10 — Transformat
Slide 10: Business Direction
iy i Business Direction John Gillam Managing Director, Bunnings Group A 4 Westarmers
Slide 11: Overview
Overview Three core retailing streams with common offer characteristics: — Stream 1: Supermarkets, Liquor and Convenience (Coles) — Stream 2: Big Box retailing (Bunnings and Officeworks) - Stream 3: Discount Department stores (Target and Kmart) Maximise synergies and eliminate waste Businesses relea
Slide 12: Stream: Coles - Supermarkets, Liquor & Convenience
iy i Stream 1 Coles - Supermarkets, Liquor & Convenience A 4 Westarmers
Slide 13: Current situation
Current situation « Recent underperformance — Poor trading from one-off impacts; execution issues, sale process and simplification « Business is adopting stronger management principles « Recent investment in price and “fresh” proposition « Confidence in supply chain transformation; outcomes will be
Slide 14: What's going to change?
What’s going to change? * Clear consistent strategy and accountability « Eliminate bureaucracy « Drive out complexity and improve execution * Educate and communicate to our team * Strong offer improvement agenda 14
Slide 15: Supermarket Improvement Agenda
Supermarket Improvement Agenda Drive a stronger customer proposition around value and convenience SANKAR NNR ecoles Save everyday (Gf Fresh Initiatives Value Format Expand housebrands General merchandise Availability Simplification BI-LO 18
Slide 16: Liquor and Convenience
Liquor and Convenience LiquorLano LIGUGR SUPERSTORE | + First Choice: widest range at lowest prices, continue network roll out * Liquorland: repositioning to a convenience offering * Vintage Cellars: premium market focus, refurbishments to lift offer coles express « Drive convenience via refurbishme
Slide 17: A Reinvigorated Coles Team
A Reinvigorated Coles Team Focus on cultural and strategic alignment Improved processes supported by cultural change on the shop floor Drive improved customer proposition for service, stock availability and fresh Drive out bureaucracy Restore pride in the business 7
Slide 18: Stream: Big Box Retail - Bunnings & Officeworks
te Lo ao iy YG y Ly Cg ay Stream 2 Big Box Retail Bunnings & Officeworks A 4 Westarmers
Slide 19: What Wesfarmers Adds
What Wesfarmers Adds « Proven “big box” retailing skills * Ability to extract co-location synergies * Build on current management team strengths * Strong focus on retail disciplines « Supply chain expertise « Cultural and strategic alignment 19
Slide 20: Officeworks
Officeworks * Unique position in Australia * Clear market leader « Well positioned brand + Unrivalled store network in segment * Significant growth opportunities — Accelerate store roll-out — Improve merchancise performance « Build on team and culture 20
Slide 21: Stream: Discount Department Stores
Stream 3 Discount Department Stores Target & Kmart A 4 Westarmers
Slide 22: Unique Position in Australia
Unique Position in Australia ©larget. ME * Target: an iconic Australian brand, high customer loyalty and a reputation for quality and value * Target has unique brand equity transitioned into house brand merchandise + Kmart struggling against competitive forces « Unrivalled network coverage in Austra
Slide 23: Growth Strategies
Growth Strategies ©larget. Me * Optimise store network by brand * Build on respective brands’ strengths: — Particularly Target apparel expertise « Leverage assortment and category opportunities * Refurbish stores for consistency and improved customer experience 23
Slide 24: Structure, Funding and Process
iy i Structure, Funding and Process Gene Tilbrook Finance Director A 4 Westarmers
Slide 25: Slide 25
Slide 26: Funding
Funding Corporate debt facilities in place to fund cash portion of offer — Final debt levels associated with the transaction are subject to a range of potential capital management alternatives Impact on rating will be reviewed prior to final scheme implementation Insurance underwriting activities wi
Slide 27: Funding - Sources and Uses
Funding - Sources and Uses | I Onin MM ia Coles equity 18.1-18.6 WES scrip issue 13.5-14.0 Coles net debt 4.0 WES new debt 8.1 Refinanced bridge facility 2.1 Fees Soe 0.4 Total Uses... 21.6-22.1 Total Sources oo 21.6-22.1 Value of $16.55 to $17.00 per Coles share (excluding final Coles dividend of $
Slide 28: Process
Process « Current expectation is that the transaction will be completed in October If lull HAR i Scheme lodgement with ASIC rel a | Scheme booklet dispatch Coles Shareholder Meeting Court approval of Scheme August 2007 August 2007- September 2007 October 2007 28
Slide 29: Benefits to Stakeholders
iy i Benefits to Stakeholders Richard Goyder Managing Director A 4 Westarmers
Slide 30: Benefit to Coles Shareholders
Benefit to Coles Shareholders « Partial roll-over relief available to larger shareholders — Expected to meet high proportion of demand * Ability to share in the turnaround of Coles through Wesfarmers equity + Full and fair price, representing a significant premium to standalone trading 30
Slide 31: Benefit to Coles Employees and Customers
Benefit to Coles Employees and Customers Coles will remain Australian-owned Individual businesses will have a stronger market focus Ultimately a better customer experience around improved value and convenience A more rewarding and attractive place to work v4
Slide 32: Indicative Earnings Breakdown
Indicative Earnings Breakdown Pre acquisition (1H07 EBIT) Chemicals and FertiisersOther (including 4% property) 5% Industrial and Safety 8% Big Box Retailing 42% Insurance 2% Coal and Energy 32% Note - Based on Wesfarmers’ and Coles’ 1HO7 segment results Post acquisition (1H07 EBIT) Chemicals and Ot
Slide 33: Questions
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Slide 34: yyy
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