The Wesfarmers Ltd (ASX: WES) share price is down more than 2% following the news it’s selling a large business.
Wesfarmers is the owner of Bunnings, Kmart, Officeworks, Target, Catch, Priceline and various chemical, energy, fertiliser and other industrial and safety businesses.
Wesfarmers sells Coregas
The company has signed an agreement to sell its Coregas business to Nippon Sanso Holdings Corporation for $770 million.
Coregas is currently part of Wesfarmers’ industrial and safety division, it’s one of Australia’s largest manufacturers and suppliers of industrial gases. The business distributes industrial, medical and specialty gases in cylinders and it offers a wide range of bulk gases for medium to large users across Australia and New Zealand.
NSHD is a Tokyo-listed company, it’s the world’s fourth-largest supplier of industrial, electronic and medical gases operating in more than 30 countries, including Japan, the US, Europe and Asia. Readers may know the Supagas business in Australia.
Management commentary
The Wesfarmers Managing Director Rob Scott said:
We believe the divestment is in the best interests of Wesfarmers shareholders and is consistent with our disciplined focus on portfolio management. The sale gives customers and team members of Coregas the opportunity to join an established business in NSHD, which has global expertise owning and operating successful industrial gas businesses.
I thank all the Coregas team for their efforts in significantly growing and improving the business. They should be very proud of the Coregas business and I am confident there will be new opportunities that will arise with NSHD, a global leader in industrial gases.
We continue to see attractive opportunities to deliver satisfactory returns for shareholders over the long term from Blackwoods and Workwear Group.
Scott said that the remaining businesses in the industrial and safety division will “continue to execute their strategies to create shareholder value, with ongoing investment from Wesfarmers.”
What to make of this sale and the Wesfarmers share price
Excluding Coregas, the remaining businesses in the industrial and safety division generated earnings before tax of $72 million in FY24, so it’s still a sizeable segment for Wesfarmers.
The sale is expected to be completed by the middle of the 2025 calendar year. It’s expecting to report a pre-tax profit of between $230 million to $260 million on the sale. The sale is subject to particular consents and approvals, including the Australian Competition and Consumer Commission (ACCC) and Foreign Investment Review Board (FIRB).
Wesfarmers seems happy with the sale price, so it should be seen as a good move for shareholders. It’ll be interesting to see what the company does with the money it’s receiving. I’d hope it invests for more long-term growth.
I wouldn’t call Wesfarmers shares cheap, but it’s getting better value with this decline. For now, there are other ASX growth shares I’d buy first.
