Wesfarmers Revises Coles Offer, Raises Dividends

Wesfarmers on Thursday offered to revise the mix of cash and scrip in its offer for Coles and
lifted expected dividend payments as it seeks to win Australia's largest takeover.

Wesfarmers, which was the only bidder for the retailer in July after a private equity consortium pulled out, said Coles shareholders would be able to increase the scrip or cash component of the offer under its latest proposal.

Sources told Reuters about the plan to boost the scrip or cash component on July 25.

Seeking to entice Coles shareholders to back the bid after a recent share price fall eroded the value of its offer, Wesfarmers on Thursday also tipped dividend payments of more than A$2.00 per share for fiscal 2008 and 2009.

The proposal, which goes to the Coles board in September, does not change the value of the offer which values Coles at A$18.7 billion (US$16.1 billion) based on Wednesday's closing prices, compared to A$21 billion originally.

However, Coles said the proposed dividend payments were a positive and it would consider the proposal.

"Wesfarmers' intention to pay full franked dividends in excess of A$2 per share for the 2008 and 2009 financial years represents a significant uplift in prospective annual dividend income for Coles shareholders," Coles Chairman Rick Allert said in a statement.

A drop in Wesfarmers shares in recent weeks has eroded the value of the offer from A$17.25 originally to A$15.61 per share at Wednesday's close. About 75% of the proposed acquisition is being funded by Wesfarmers stock.

Wesfarmers' has offered A$4 cash and 0.2843 of its shares plus a A$0.25 dividend for every Coles share. The offer was unveiled on July 2.

Under the current offer, if Wesfarmers' share price remains below A$41.16 for 20 consecutive days and underperforms the broader market, either side can walk away.

Wesfarmers stock was up 1.3% at A$40.47 on Thursday, with Coles up 2.4% at A$14.41, both outperforming a broader market up 0.5%.

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