Information on the 2021 Capital Return 

 

As announced on Friday, 27 August 2021, the Wesfarmers Board recommended a return of capital to Wesfarmers shareholders of 200 cents per share. Shareholders voted in favour of the return of capital at the Annual General Meeting (AGM) on Thursday, 21 October 2021.

The total amount of the distribution will be approximately $2,268 million and will be paid on Thursday, 2 December 2021. The record date for the capital return payment is 4:00pm (Perth time) on Friday, 19 November 2021.

Please find below some information and frequently asked questions in relation to the 2021 capital return.

General information

Shareholder information


    Key dates

    What are the key dates for the capital return?

    The timetable below assumes the return of capital is approved by shareholders.

    Thursday, 21 October 2021

    • Annual General Meeting, where shareholders voted to approve the proposed return of capital.

    Tuesday, 16 November 2021

    • Effective date for return of capital.

    Wednesday, 17 November 2021

    • Last date for trading in ‘cum return of capital’ for shares.

    Thursday, 18 November 2021

    • Shares commence trading on an ‘ex return of capital’ basis. 

    4:00pm (Perth time) Friday, 19 November 2021

    • Record date for determining entitlement to participate in the return of capital.

    Thursday, 2 December 2021

    • Payment date for return of capital
    • Shareholders are sent return of capital payment advice.

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      General information

      Capital return overview

       

      What is the capital return?

      The Wesfarmers Board is undertaking a return of capital to Wesfarmers shareholders of 200 cents per share (or approximately $2,268 million in total). An application for a Class Ruling has been lodged with the Australian Taxation Office in relation to the form and taxation treatment of the distribution. The form of the distribution is dependent on the Class Ruling, but is likely to be entirely capital in nature, with no dividend component. Shareholders will be unable to elect to participate in the Dividend Investment Plan in relation to the capital return.

      The capital return distribution will be paid on Thursday, 2 December 2021.

      Under the return of capital, all shareholders will be treated in the same manner. The return of capital will constitute an equal reduction of Wesfarmers’ share capital for the purposes of Part 2J.I of the Corporations Act 2001 (Cth). It applies to each shareholder equally in proportion to the number of shares they hold and the terms of the return are the same for each shareholder.

      Why is the capital return being undertaken?

      The capital return is being undertaken to return a portion of surplus capital equitably to shareholders and to ensure that Wesfarmers has a more efficient capital structure. The return of capital will be made possible by the Wesfarmers Group’s continued strong cash flow generation and the receipt of approximately $4.3 billion in proceeds from the sales of a number of assets during FY2018 to FY2020. These include the divestment of Wesfarmers’ interest in the Bengalla coal mining joint venture, Curragh coal mine, Kmart Tyre & Auto, Quadrant Energy and 10.1 per cent of Wesfarmers’ post-demerger 15 per cent shareholding in Coles.

      The capital return reflects the strength of Wesfarmers’ balance sheet as set out in the 2021 Annual Report, its ability to generate cash flow and the availability of well-established funding sources. Upon completion of the capital return, Wesfarmers expects it will still maintain its current strong credit ratings and continue to have the balance sheet capacity to take advantage of value accretive opportunities should they arise.

      The return of capital demonstrates Wesfarmers' commitment to efficient capital management and its focus on providing a satisfactory return to all shareholders.

      How does the capital return work and what is the effect on the company?

      Wesfarmers shareholders will receive a 200 cents per share cash distribution. The distribution is expected to be entirely capital in nature, with no dividend component, subject to the final Class Ruling from the Australian Taxation Office.

      Collectively, shareholders will receive a total distribution of approximately $2,268 million. Payment of the return of capital will result in the transfer of this capital directly to shareholders. There will be no share consolidation in relation to the capital return.

      In determining whether to recommend to shareholders the approval of the return of capital, the Board considered potential impacts on Wesfarmers’ credit rating. Taking into account Wesfarmers’ robust credit metrics and continued strong cash flows, the Board considers that the return of capital will not adversely affect Wesfarmers’ credit rating.

      The return of capital will be funded by a combination of Wesfarmers’ available cash balances and existing debt facilities. The proportion of funding from each source will be determined having regard to the most cost-effective source of funding available as at the date of payment.

      In determining whether to recommend to shareholders the approval of the return of capital, the Board reviewed Wesfarmers' assets, liabilities and expected cash flows. The Board considers that the return of capital is fair and reasonable to shareholders as a whole, and will not materially prejudice Wesfarmers’ ability to pay its creditors, or impact on its solvency position.

      Having regard to Wesfarmers’ strong balance sheet and cash flow generation, together with its well‑established funding sources (if required) and robust credit metrics, the Board is of the opinion that, consistent with Wesfarmers’ growth strategy, Wesfarmers is able to undertake the return of capital without materially prejudicing its ability to fund new investments, or to take advantage of value accretive opportunities, if they arise.

      No adverse tax consequences are expected to arise for Wesfarmers as a consequence of return of capital.

      How will the capital return be funded?

      The return of capital will be made possible by the Wesfarmers Group’s continued strong cash flow generation and the receipt of approximately $4.3 billion in proceeds from the sales of a number of assets during FY2018 to FY2020. These include the divestment of Wesfarmers’ interest in the Bengalla coal mining joint venture, Curragh coal mine, Kmart Tyre & Auto, Quadrant Energy and 10.1 per cent of Wesfarmers’ post-demerger 15 per cent shareholding in Coles.

      The return of capital will be funded by a combination of Wesfarmers’ available cash balances and existing debt facilities. The proportion of funding from each source will be determined having regard to the most cost-effective source of funding available as at the date of payment.

       


      Return of capital

      What is the capital component?

      The distribution is likely to be entirely capital in nature, subject to the final Class Ruling from the Australian Taxation Office. The Wesfarmers Dividend Investment Plan will not apply to the return of capital payment.

      Why return capital this way?

      This method was seen as the most equitable way of returning a portion of surplus capital in cash to all shareholders. As Wesfarmers has a high dividend payout ratio and distributes, where possible, available franking credits, a return of capital was seen as the most efficient distribution of capital to shareholders.

      The return of capital demonstrates Wesfarmers' commitment to efficient capital management and its focus on providing a satisfactory return to all shareholders.

      What will happen to the number of shares I hold?

      The return of capital to shareholders will not affect the number of Wesfarmers shares that you hold - there is no share consolidation as part of this capital management initiative 

      Is there a dividend component?

      The distribution is likely to be entirely capital in nature with no dividend component, subject to the final Class Ruling from the Australian Tax Office.


      Shareholder information

      Your shareholding

      Will I be eligible for the capital return?

      To be eligible to receive the return of capital, you need to be a registered shareholder on the record date for determining entitlements, which is 4.00pm (Perth time) on Friday, 19 November 2021.

      The last date to purchase shares which are eligible to receive the return of capital is Wednesday, 17 November 2021.

      Any Wesfarmers shareholder who:

      • sells their shares while the shares are trading on an ‘cum return of capital’ basis (i.e., before Wednesday, 17 November 2021); or
      • purchases their shares after the shares start trading on an ‘ex return of capital’ basis (i.e., from Thursday, 18 November 2021 onwards),

      will not receive the capital return. 

      Do I have the choice to participate in the capital return?

      • The return of capital was considered and approved by shareholders at the 2021 AGM. All registered shareholders on the record date will receive the capital return – there will not be an opportunity for these shareholders to 'opt out' of the capital return. The record date for the return of capital is 4:00pm (Perth time) on Friday, 19 November 2021.

      Any Wesfarmers shareholder who:

      • sells their shares while the shares are trading on an ‘cum return of capital’ basis (i.e., before Wednesday, 17 November 2021); or
      • purchases their shares after the shares start trading on an ‘ex return of capital’ basis (i.e., from Thursday, 18 November 2021 onwards),

       
      will not receive the capital return.

      How much do I receive and how is the payment made?

      You will receive 200 cents for every share you hold as registered holder on the record date of 4:00pm (Perth time) Friday, 19 November 2021. For example, if you hold 1,000 shares as at the record date, you will receive 1,000 x $2.00 or $2,000 as the return of capital payment.

      As with dividend payments, payments of the distribution to shareholders with a registered address in Australia, New Zealand and the United Kingdom will be made by way of direct credit to a financial institution in Australia, New Zealand or the United Kingdom, as applicable, (including a bank, building society or credit union account).

      Does the Dividend Investment Plan (DIP) apply?  

      The return of capital is not eligible to participate in the DIP.

      Will my shares be worth less after the capital return?

      When the return of capital is implemented, shares may trade at a lower price from the 'ex return of capital' date than they otherwise would have done had the return of capital not occurred. This is due to the outflow of funds to shareholders. Wesfarmers shares will commence trading on an 'ex return of capital' basis on Thursday, 18 November 2021. 

       


      Payment details

      How and when will I be paid?
      If you provide your direct credit payment instructions by 4:00pm (Perth time) on Friday, 19 November 2021, the return of capital payment will be made on Thursday, 2 December 2021 by direct credit to your financial institution if your registered address is in Australia, New Zealand or the UK. Payments should appear in your bank account between Thursday, 2 December and Thursday, 9 December 2021, depending on the transfer time between banks. Payments made to credit unions may take longer.

      Shareholders will be sent the payment advice for the return on capital payment by email or in hard copy on Thursday, 2 December 2021.

      How do I provide, update or check my bank account details?

      Shareholders who have not already provided the share registry with their bank account details, or who wish to check or change their details, may do so online via Computershare at www.computershare.com.au/easyupdate/wes.

      For enquiries or to request a paper Direct Credit Payment Form, please contact Computershare Investor Services Pty Limited on 1300 558 062 (within Australia) or (+61 3) 9415 4631.

      Participants of the Wesfarmers employee share plans can check or update their bank account details online at www.computershare.com/WesfarmersSharePlans (using your Securityholder Reference Number and PIN or username and password to log in). Alternatively, please contact Computershare Plan Managers on 1800 192 771 (within Australia) or 0800 888 481 (within New Zealand).

       


      Tax implications

      What are the tax implications of the capital return?

       

      The Wesfarmers Limited 2021 Shareholders Tax Information Guide and ATO class ruling will be published following payment of the capital return. The summary in those documents and in this section is general in nature and should not be relied upon as advice.

      In general terms, there will be no immediate tax liability for most shareholders relating to the return of capital, where the cost base of their shares exceeds the return of capital.

      If the cost base (after any relevant adjustment) of a share acquired after 19 September 1985 is less than the return of capital amount (on a cents per share basis), then an immediate capital gain will arise for the difference. The capital gain will be a discounted capital gain for shareholders that are an individual, trust or complying superannuation fund and acquired their shares at least 12 months before the payment date of Thursday, 2 December 2021. The discount factor for resident individuals and trusts is one-half.

      No capital gain or capital loss should arise in respect to a share acquired on or before 19 September 1985.

       


      Information for participants of the Wesfarmers employee share plans

       

      I am a participant in one or more of the Wesfarmers employee share plans. How will the return of capital be treated for tax purposes?

      The tax implications for participants of the Wesfarmers employee share plans is as follows:

      For those employee shareholders who hold their shares within an Australian Wesfarmers employee share plan, are tax residents of Australia, only work in Australia and hold their shares on capital account at the time the return of capital is paid, the tax implications of the return of capital are as follows:

      • For participants in the Australian tax exempt share plans or the loan plans the cost base for each share held on behalf of employees should be reduced by the return of capital amount.

      For participants in all other Australian employee share plans, the tax implications are as follows:

      –      For shares that have not reached their ESS deferred taxing point at the time of the return of capital payment, the return of capital payment will give rise to a capital gain for tax purposes. The capital gain will be a discounted capital gain for shares allocated at least 12 months before the payment date of Thursday, 2 December 2021. The discount factor for resident individuals is 50 per cent.

      –      For shares that have reached a taxing point (i.e. shares held within the Deferred Plans at the time of the return of capital payment, the cost base for each share held on behalf of employees should be reduced by the return of capital amount.

      Following the payment date, it is expected Wesfarmers will provide Australian participants with a statement which sets out the taxation implications of the return of capital payment and where applicable information in relation to any cost base adjustments.

      For those employee shareholders who hold their shares within a New Zealand Wesfarmers employee share plan, are tax residents of New Zealand and only work in New Zealand, it is expected the return of capital payment will be treated as dividend income.

      Wesfarmers will provide separate information in relation to the tax implications of the return of capital payment for participants who are located within Hong Kong and India.

      How can I calculate my return of capital payment and when will I receive this payment?

      The capital return payment received in relation to shares held within the employee share plans will be based on the number of shares held on the record date 4:00 pm (Perth time) Friday, 19 November 2021. To calculate your payment, multiply the number of shares held on the record date by $2.00 per share.

      The payment will be paid to you on Thursday, 2 December 2021 into the bank account recorded on the register. If you have a New Zealand bank account the exchange rate that will be used to convert the Australian dollar payment into New Zealand dollars will be set on the record date.

      If you participate in the Loan Plans the payment for these shares will be applied to each outstanding loan balance.  If there is any residual from the return of capital payment after the payment has been applied to your loan balance, the remaining balance will be paid directly into your bank account on Thursday, 2 December 2021.