Melbourne, Nov 7 - Wesfarmers Ltd will take control of retailer Coles Group Ltd in Australia's largest corporate takeover, after Coles' shareholders voted overwhelmingly for the A$19.7 billion ($18.4 billion) deal.
Coles said in a statement on Wednesday that 99.25 percent of votes were cast in favour of the takeover, ending a 15-month saga for control of the country's second-largest supermarket chain.
Wesfarmers, a conglomerate which runs Australia's largest hardware chain Bunnings, faces an uphill task to overhaul the supermarkets, where sales have stalled and Coles has lost significant market share to larger rival Woolworths Ltd .
"It's a big job, but we are hopeful the Wesfarmers management will be up to it," said Argo Investments Managing Director Rob Patterson. Argo voted its A$41 million worth of shares in favour of the deal.
The combined group will become Australia's largest retailer with revenues of A$44 billion, and the largest private-sector employer with some 200,000 staff.
Wesfarmers has said the turnaround will likely take 3-5 years, and it plans to replace the existing supermarkets management with retailing experts including Archie Norman, who oversaw the turnaround of the ailing Asda supermarket chain.
"We have got a heck of a lot of hard work ahead of us now. It's not a simple fix," Wesfarmers Chief Executive Richard Goyder told reporters.
Goyder said many of Wesfarmers' planned changes will not be implemented until next year so as not to disrupt Coles supermarkets and the Target and Kmart general merchandise stores in the critical run-up to the Christmas holiday season.
Both Coles and Wesfarmers date back to 1914, when George Coles opened a variety store in Melbourne and Wesfarmers began as a farmers' cooperative in Western Australia.
Wesfarmers stock added 1 percent to A$42.94 by 0405 GMT, while Coles shares, which will be de-listed on Friday, rose 1.1 percent to A$15.89.
ROCKY ROAD
Coles put itself up for sale in February after a poor performance and a profit downgrade. Last year it rejected two bids by private equity firm Kohlberg Kravis Roberts [KKR.UL].
Wesfarmers proceeded with a solo bid in June, after its private-equity partners Permira and Pacific Equity Partners dropped out as the cost of debt soared in the wake of the U.S. subprime meltdown. It became the only bidder after a rival private equity consortium that had included KKR pulled out.
Several shareholders at the sometimes stormy meeting in Melbourne criticised the decision to sell the company, and the sale process itself, including Coles' decision last year not to put the KKR offer to shareholders.
Coles Chairman Rick Allert rejected the criticism, saying the Wesfarmers deal was an "acceptable and respectable" outcome.
"Obviously we could not have predicted that in June international debt markets would collapse," thus prompting the private-equity bidding consortium to pull out of the auction, he told the meeting.
The ownership uncertainty has hobbled Coles' performance all year, with its core food and liquor business earnings falling by 9.5 percent in 2007. In the fourth quarter, comparable store sales for food and liquor rose a scant 0.2 percent, while Woolworths sales jumped 8.2 percent.
The takeover, which has already received regulatory approval, is due to take effect on Nov. 23.