WESFARMERS LIMITED — M&A Activity 2007

Sep 12, 2007

Thursday, 13 September 2007

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Independent Expert Report

Coles Group said today it had now received the draft report of the Independent Expert, Grant Samuel & Associates.

Coles Group Chairman, Rick Allert, said the report of Grant Samuel would be released when it and the Scheme Booklet, of which it would form a part, had been reviewed by ASIC and approved by the Supreme Court. The Booklet would be sent to shareholders in approximately four weeks time.

Mr Allert said that he considered that shareholders would be assisted at this stage by the following key points made in the draft report:

• the Wesfarmers’ proposal is in the best interests of shareholders

• the Coles Group is valued in the range of:

• $19.6-$22.0 billion equity value; or

• $16.21-$18.23 per share,

• reflecting the estimated full underlying value of Coles Group businesses. This exceeds the price at which Grant Samuel expects the shares to trade in the absence of the proposal or speculation regarding an alternative transaction;

• the consideration offered by Wesfarmers is attributed a value of

• $14.87-$15.44 per Coles Group share,

• (based on a Wesfarmers’ ordinary share price of $38.00-$40.00, adjusted for the final Wesfarmers’ dividend of $1.40 and allowing for a premium over the ordinary share price for the WPPS. Grant Samuel valued the WPPS at a premium to the ordinary shares of $1.00-$1.50 per share (for an ordinary share price of $40) and at $1.50-$2.00 (for a share price of $38));

• the effect of the discount between the valuation of the Company and the Wesfarmers’ proposal is mitigated by the fact that Coles Group shareholders would have a 44% economic interest in the combined entity;

• the valuation of the Coles Group and the Wesfarmers’ proposal is not straightforward and is subject to uncertainty, exacerbated by recent volatility in financial markets; and

• whilst the Wesfarmers’ proposal is not in the fair value range, it is, in the Expert’s opinion, in the best interests of shareholders in the absence of a superior proposal.

Mr Allert said that in forming its opinion, Grant Samuel had taken into account the following factors:

• the Wesfarmers’ proposal is the outcome of an extensive worldwide sale process and was the only firm offer for all of Coles Group;

• Wesfarmers’ shares might trade higher once the market settled and the proposal successfully implemented;

• continued ownership uncertainty is likely to be damaging for the Coles Group, particularly Coles’ Supermarkets;

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• ownership changes might provide the opportunity for cultural change and an accelerated turnaround within the Supermarkets’ business;

• Coles’ shareholders will have a substantial ongoing exposure to any continuing upside from the Coles’ businesses under Wesfarmers’ ownership;

• the Wesfarmers’ proposal does not deliver a full premium for control; however, if analysed as a merger, delivers reasonable balance between the interests of Coles Group and Wesfarmers’ shareholders, and

• the choice for shareholders is essentially between the Wesfarmers’ proposal and a standalone turnaround strategy that is subject to considerable execution and competitive risk.

The Coles Group Board will unanimously recommend the Wesfarmers’ proposal to shareholders at a scheme meeting in November in the absence of a superior offer.

More information:

Media: Scott Whiffin 03 9829 5548 Analysts: Rebecca King 03 9829 4521

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