Australia's Wesfarmers Ltd is hoping to raise as much as A$1.5 billion ($1.12 billion) by spinning out its Officeworks stationary division in an initial public offering, a broker who saw the float's marketing materials said on Monday.
Australia’s Wesfarmers Ltd is hoping to raise as much as A$1.5 billion ($1.12 billion) by spinning out its Officeworks stationary division in an initial public offering, a broker who saw the float’s marketing materials said on Monday. The valuation – described by James McGlew, executive director of stockbroker Argonaut, as a “bull-market set of numbers” – comes a decade after Wesfarmers purchased the then-struggling office supplies network as part of its A$19.3 billion takeover of supermarket chain Coles.
Officeworks’ earnings have nearly doubled in the meantime.Perth-based Wesfarmers, a retail-to-mining conglomerate and Australia’s top company by sales, had said in February it was considering an IPO for Officeworks. But the distribution of research reports to investors on Monday offered the first indication of the company’s price hopes. The reports from bankers JP Morgan, Macquarie and UBS valued the office supplies, stationary and technology retailer at between A$1 billion and A$1.5 billion, McGlew told Reuters.
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Based on estimated 2018 earnings, the lower end of the range gives a price-to-earnings ratio around 15, which is nhigher than international peers such as U.S.-listed Staples, which trades at a ratio of 12.6. Wesfarmers was not immediately available for comment.”This is a bull-market set of numbers as far as pricing is concerned, but who is to say that that isn’t going to continue on?” McGlew said. “It is expensive but not outrageous, and clearly prices in the potential for more growth … it is another good turnaround from Wesfarmers.” Macquarie, UBS and JP Morgan spokespeople declined to comment when contacted by Reuters.