Australia-listed conglomerate Wesfarmers today announced it has agreed to sell its Kmart Tyre and Auto Service (KTAS) business to Continental AG for $350 million.
On successful completion of the transaction, Wesfarmers estimates it will report a pre-tax profit on sale of approximately $270 million to $275 million, subject to completion adjustments.
The sale is subject to certain consents and approvals including from the Australian Competition and Consumer Commission and the Foreign Investment Review Board.
KTAS is one of Australia’s largest tyre, automotive service, and repair retailers. The business has 258 stores in Australia with over 1,200 employees. It is also the largest single employer of apprentice motor mechanics in Australia.
Continental, based in Germany, will use the KTAS name and logo for a transitional period following the sale. Its five divisions in 2017 generated sales of €44 billion and it currently employs more than 243,000 people in 60 countries.
Continental’s Tire division is a technology leader in tyre production and offers a broad product range for passenger cars, commercial vehicles, and two-wheelers.
Its product portfolio also includes fleet applications, as well as digital management systems for commercial vehicle tyres.
Wesfarmers Managing Director Rob Scott said the agreement to sell KTAS crystallises value for shareholders from the business turnaround since it was acquired as part of the Coles Group in 2007.
“We believe that the divestment is in the best interests of Wesfarmers’ shareholders, while giving the employees and customers of KTAS the opportunity to join a highly complementary business in Continental. Continental’s automotive industry expertise will further strengthen the business’ customer offering,” Scott said.
Subject to satisfying conditions precedent, the divestment of KTAS is expected to complete in the first quarter of the 2019 financial year.
Last week, Wesfarmers also announced it has agreed to sell its 40 per cent interest in the Bengalla Joint Venture to its joint venture partner New Hope Corporation (ASX:NHC) for $860 million.
On successful completion of the transaction, Wesfarmers expects to report a pre-tax profit on sale of approximately $670 million to $680 million subject to completion adjustments.
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Bengalla is currently owned 40 per cent by Wesfarmers, 40 per cent by New Hope, 10 per cent by Taipower and 10 per cent by Mitsui. The transaction is subject to regulatory approval and pre-emption rights under the Bengalla Joint Venture Deed. The sale of the interest in the Bengalla Joint Venture is expected to close in the fourth quarter of 2018. – AsiaPEVC.com
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