Australian conglomerate Wesfarmers (WES.AU) has pulled a AUD1.5 billion IPO of its Officeworks chain after fund managers balked at the high valuation.
Photographer: Carla Gottgens/Bloomberg
Here’s what Australia’s largest private sector employer was saying about the IPO this morning:
In light of current equity markets conditions, Wesfarmers has determined that an IPO of Officeworks at this point in time would not realise appropriate value and would not be in the best interests of its shareholders.
Wesfarmers said that since acquiring the business in 2007, Officeworks had doubled its earnings and improved its return on capital to 13.9% from 5.7%.
The Perth-based company has earned a reputation as a savvy investor with well-timed disposals (such as its Landmark agribusiness) and acquisitions (such as the Howard Smith hardware and home improvement business and the Coles supermarket chain) that have driven its evolution into a leading blue chip stock.
Here’s a take from The Australian Financial Review‘s Sue Mitchell (subscribers can find the story here):
Officeworks’ joint lead managers, Macquarie Capital, JPMorgan and UBS, had valued the retailer between $1.14 billion and $1.5 billion, but fund managers said they were only prepared to pay around $1.2 billion.
“I wouldn’t be comfortable buying it at the upper end of the range because you have to leave something on the table for new shareholders,” said Arnhem Asset Management fund manager Chris Tynan. Fund managers were also suspicious of Wesfarmers’ motivations for selling Officeworks, saying the conglomerate did not need the cash.
They feared Wesfarmers, which is known as a savvy buyer and seller of assets, was getting out at the top of the cycle and ahead of the expansion of Amazon, which has decimated sales at large US office products retailer Staples.
Wesfarmers shares are down 1% on Wednesday. The stock is up 3% so far this year.
May 17, 2017 at 07:29AM
from Robert Guy
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