Supermarket spins off $14b of property assets

Published in the AAP, October 2012

Woolwoths is spinning off its $1.4 billion shopping centres portfolio in a move that is expected to free up cash to help fight its price war with rival Coles.

The retailer will transfer its 69 shopping centres in Australia and New Zealand into the newly-created property company Shopping Centres Australasia Property Group (SCA Property Group), which will list on the stock market.

Woolworths chief executive Grant O'Brien said the plan would allow the company to focus on growing earnings in its core retail business by reducing the capital invested in property.

"That's at the heart of what we're doing - getting back to ensuring that we've got our focus on our retail business," he said.

Woolworths shareholders will receive one stapled unit in SCA Property Group for every five Woolworths shares that they hold as at November 30, 2012.

SCA will also launch a public offer of 337.3 million stapled units to raise between $425 million and $506 million to partially fund the acquisition of the shopping centres.

Woolworths shareholders will be asked to approve the new property trust at the retailer's annual general meeting on November 22.

If approved, SCA is expected to start trading on the Australian Securities Exchange in December.

Mr O'Brien said the properties ranged considerably in age, and therefore the occupancy rate varied, but overall they had an average of 95 per cent.

The properties in Woolworth's new hardware chain Masters have been excluded from the deal until the business becomes better established.

Wealth Within analyst Dale Gillham said Woolworths would be able to use the capital generated from the deal to help roll out their Masters stores and compete with the successful Bunnings and Mitre 10 chains.

He said Woolworths could also use the cash to step up its battle with Coles.

"It's good for the shareholders in terms of longer-term growth because it frees up capital," Mr Gillham said.

He said while he expected the SCA shares would not grow as quickly as Woolworths shares, they would offer a stable income that would suit retirees.

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