SYDNEY (Reuters) - Australian conglomerate Wesfarmers Ltd (WES.AX) is wary of dealmaking and is instead focused on existing businesses, its managing director said on Thursday, after a disastrous foray into British hardware.
The retail-focused firm is in the midst of its biggest portfolio reshuffle in years, having also sold a coalmine and announced plans to spin off its Coles supermarket chain.
That has spurred speculation of a bold new play from its new managing director, Rob Scott, who took on the role last November. Citi analysts estimate the company war chest could be as large as A$12 billion ($9 billion).
But Scott said the company would need to see a “very compelling” opportunity before making a significant investment.
“When it comes to allocating big licks of capital, particularly in new businesses, new acquisitions, what I’m reinforcing is that that’s not the main game, it’s the icing on the cake,” he told investors at a strategy day in Sydney.
“We will explore it if we feel it delivers superior returns to our shareholders, if not we will return the capital.”
Last month Wesfarmers walked away from British home improvement chain Homebase, selling it for a nominal 1 pound just two years after buying it, ending an embarrassing offshore adventure that cost it $1 billion.
Shares in Wesfarmers rose 0.9 percent higher to A$46.08, near the top of the A$36.60 to A$46.95 range the stock has traded in for five years. The broader market was up 0.4 percent.
“What could lift them out [of that range] would be a significant acquisition that investors are pleased by,” said Michael McCarthy, chief markets strategist at stockbroker CMC Markets.
“Until they have a target, we won’t hear much, but the fact that it is holding up so well, I would suggest, indicates shareholder confidence.”
Reporting by Tom Westbrook; Editing by Stephen Coates and Edwina Gibbs