Demerger of Coles (COL) from Wesfarmers (WES)

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Overview


On 16 March 2018, Wesfarmers (ASX: WES) announced their intention to demerge Coles as a separate entity. For detailed information on the demerger, please refer to the Scheme Booklet.

Key Dates

Description Date
Effective Date 20/11/2018
Record Date 22/11/2018
Implementation Date (Coles shares received) 28/11/2018
Completion of sale for Selling Shareholders 19/12/2018
Dispatch of payment for Selling Shareholders 02/01/2019

Key Facts

Quantity of Coles shares received

1 Coles share received for every 1 Wesfarmers share held as at the Record Date (22/11/2018).2

Apportionment of cost base

Entity ASX Code VWAP ($)6 Apportionment (%)3
Coles Group Limited COL $12.8459 28.91 %
Wesfarmers Limited WES $31.5848 71.09 %


Demerger roll over

Wesfarmers Shareholders can choose to obtain demerger roll-over relief.4

Sale Facility

Small Shareholders can take part in the Sale Facility.

Small Shareholders are defined as shareholders with a holding of WES shares less than or equal to 160 shares.5

The average sale price achieved under the sale facility was $11.9921 per Coles share.7

References

1. Scheme Booklet, p. 6

2. Scheme Booklet, section 1.1

3. ATO CR2018/59 para. 46

4. ATO CR2018/59 para. 39

5. Scheme Booklet, section 4.8

6. ATO CR2018/59 para. 68

7. Remittance of sale facility proceeds para. 2

Instructions for Simple Fund 360


This guide will look at the three general scenarios that could occur when processing the demerger:

  1. The fund receives the COL shares and applies demerger relief
  2. The fund receives the COL shares and does not apply demerger relief
  3. The fund being a Small Shareholder and taking part in the Sale Facility

 

Receiving the COL shares and applying demerger relief

  1. Navigate to the Corporate Actions screen:
    From the Main Toolbar, go to Investments.
    Select Corporate actions from the list.

  2. Under the Action Required tab, select Process next to the demerger corporate action

    Acquisition Date

    The Corporate Actions screen offers the following two options in selecting the acquisition date for the COL shares:

    1. Original WES share purchase date

    You may wish to select this option in the situation where discounted capital gain from disposing of the COL shares is desired.

    2. Implementation date of demerger (28/11/2018)


    Please see the following excerpts from CR 2018/59


    CR 2018/59

    Coles shares received by Wesfarmers Shareholders that hold post-CGT Wesfarmers shares

    43. For Wesfarmers Shareholders who choose demerger roll-over for their shares acquired after 19 September 1985 (post-CGT Wesfarmers shares):

    • any capital gain made when CGT event G1 happened to their Wesfarmers shares under the demerger is disregarded (subsection 125-80(1))
    • those Coles shares were acquired on the Implementation Date (except for the purpose of determining an entitlement to make a discount capital gain in relation to a subsequent CGT event that happens to the shares: see paragraph 48 of this Ruling) (section 109-5), and
    • it is necessary to recalculate the first element of the cost base and reduced cost base of their post-CGT Wesfarmers shares, and calculate the first element of the cost base and reduced cost base of the corresponding Coles shares they acquired under the demerger (subsection 125-80(2)) - see paragraphs 44 to 46 of this Ruling for more details.

    CR 2018/59

    Acquisition date of the Coles shares for the purpose of making a discount capital gain

    48. For the purpose of determining whether a Wesfarmers Shareholder can make a discount capital gain from a future CGT event that happens to a Coles share they acquired under the demerger:

    • where the share corresponds with a post-CGT Wesfarmers share, it will be taken to have been acquired on the date the Wesfarmers Shareholder acquired, for CGT purposes, that Wesfarmers share (item 2 of the table in subsection 115-30(1)). This will be the case whether or not the Wesfarmers Shareholder chooses demerger roll-over
    • where the share corresponds with a pre-CGT Wesfarmers share and the Wesfarmers Shareholder does not choose demerger roll-over, its date of acquisition is the Implementation Date (section 109-5). (See paragraph 41 of this Ruling for the case where the roll-over was chosen.)
  3. Select New Investment Account to create a new Chart Account that will contain the newly demerged Coles Group Limited security:
  4. The rest of the details will be prefilled. Click Process Corporate Action to finish.


Receiving the COL shares and not applying demerger relief

  1. Process the demerger normally in the Corporate Actions screen as done in scenario 1.
  2. Record the following simultaneous disposal and repurchase transaction:

    Transaction Date: 28/11/2018
    Contract Date for COL shares: 28/11/2018

    Account Units DR ($) CR ($)
    77600/COL.AX COL shares received COL shares received x $12.8459  
    77600/COL.AX COL shares received   COL shares received x $12.8459

Taking part in the Sale Facility

  1. Process the demerger normally in the Corporate Actions screen as done in scenario 1.
  2. Record the following disposal transaction:

    Transaction Date: 02/01/2019

    Account Units DR ($) CR ($)
    91000 - Bank Data Clearing N/A COL shares held x $11.9921  
    77600/COL.AX COL shares held   COL shares held x $11.9921

    The amount in the Bank Data Clearing Account will need to be matched to the sale proceeds received by the bank account.

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Comments

1 comment
  • For me the automated corporate action for the coles demerger is producing the wrong result.
    1. Even though a ledger and balance review check shows the correct unit balance for WES and corporate action screen says the current balance is 60% higher than it actually is.
    2. Even though the review screen before processing gives the correct balances for the head and merged security.
    3. After processing the WES balance has been reduced by 60% but the COL balance id correct.
    I tried processing a manual demerger and got the same errors. I cannot see where the higher WES balance comes from that shows in the corporate action screen.
    Did other users have a similar problem? How did you fix it?

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