I’m a fan of corporate demergers or so-called “spin-offs”. In many respects, spin-offs are a better bet than sharemarket floats because more is known about the asset. But I’m struggling with the logic behind Wesfarmers’ intention to demerge Coles and list it on ASX.
History shows the best spin-offs usually involve unrelated assets with low synergies. Foster’s Group’s successful demerger of Treasury Wine Estates (TWE) in 2011 is an example: wine is a different business to beer and TWE had better prospects as a standalone company.
The same is true of Fairfax Media’s demerger of Domain Holdings Australia; BHP Billiton’s separation of the South32 assets; and National Australia Bank’s spin-off of CYBG Plc.