Wesfarmers Mulling Spinoff of Cole Group Unit

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By Esther Tanquintic-Misa | October 16, 2012 7:37 PM EST

Wesfarmers Ltd. (WES), Australia's second biggest retailer, is mulling to spinoff the 25 shopping centres it owns under its Coles Group unit for $700 million.

A report by the Australian Financial Review said the company has approached investment banks RBS/CIMB and Goldman Sachs, along with real estate adviser Jones Lang LaSalle, to review the plan, which is expected to be completed by end December.

Yet, Coles will keep a stake in the venture and will remain property manager to ensure its controlling hold over its store network. It is likewise a positioning strategy meant for faster facilitation in the event of future upgrades.

Leasing 95 per cent of its supermarket space, Coles manages 744 supermarkets, 794 liquor outlets, 625 Coles Express stores and 92 hotels. It however only holds a minor percentage on all these assets.

Coles' plans comes after Woolworths Ltd early this month revealed plans of spinning off its existing 69 shopping centre assets into a real estate investment trust, along with the intention to knock on investors for $506 million to help fund and push the deal. The trust will be called Shopping Centres Australasia Property Group (SCA Property Group).

It will be established through an in-specie distribution to Woolworths shareholders.

The centres turned over to the trust have been independently valued at $1.406 billion, Woolworths earlier said.

But unlike with Woolworths, Wesfarmers will retain a stake in the venture for some "degree of control," analyst Simon Rooney said in Bloomberg News.

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