The Wesfarmers Ltd (ASX: WES) share price will be one to watch when trading resumes this morning. At close of trade yesterday, shares in the retailing conglomerate were selling for $55.20 – up 1.1% on the previous day. By comparison, the S&P/ASX 200 Index (ASX: XJO) finished the day 0.44% higher.
The company comes into focus as its largest subsidiary, Bunnings, announced it is acquiring privately owned Beaumont Tiles.
Let’s take a closer look at the announcement.
Bunnings buying Beaumont
Late yesterday, Wesfarmers announced that Bunnings Group has entered into an agreement to purchase Beaumont Tiles for an undisclosed amount. The deal is still subject to “a number of conditions, including regulatory approval.”
The purchase marks the latest move by Wesfarmers to diversify its business and consolidate its hold on the trade and construction market.
Wesfarmers says Beaumont will remain “separate and distinct” to the Bunnings Warehouse brand, just like Adelaide Tools, which the subsidiary purchased in April 2020.
In its statement, Wesfarmers said the purchase of Beaumont will allow the company to expand into further market segments.
“Beaumont Tiles services both trade and consumer customers and has a specialised product and service capability that is not able to be offered through the Bunnings Warehouse format,” Bunnings managing director Mike Schneider said. Mr Schneider also said Bunnings will continue to invest in the future growth of Beaumont.
Beaumont Tiles executive chair Bob Beaumont commented that the executive team is happy to sell. He said:
After 53 years dedicated to a business that my dad started in South Australia, it’s time to retire. I knew that it would never be an easy thing to do, and it’s been a tough decision, but the board and I recognised the need for us to make way for a younger team.
What made the decision easier, was knowing the brand and business we worked so hard to build from scratch would be placed in the best possible position for on-going success and growth and I’m really thrilled at the outcome for Beaumont. Our family signed a contract to sell the business to Bunnings, as they understand our brand and culture, and will look after our extended Beaumont family including our franchisees and our teams.
Other recent news
Aside from Bunnings, Wesfarmers owns a number of other major retailers including Kmart, Target, and Officeworks.
Wesfarmers recently gave a presentation on the future of Kmart. In it, the company said it plans to make Kmart the focal point of the group, whilst simplifying the Target business and reducing costs. Wesfarmers has already begun the process of converting Target-branded stores to Kmart.
As well, some top brokers believe the Wesfarmers share price is currently a good deal, despite its 33.25 price-to-earnings (P/E) ratio.
In other news outside of the ASX, Bunnings recently said it was ready, willing, and able to host mass vaccination sites at its warehouses.
Wesfarmers share price snapshot
Over the past 12 months, Wesfarmers shares have increased by 46.3%. At its current level, the Wesfarmers share price is only just off its all-time high of $56.40, which it achieved earlier this year.
Wesfarmers has a market capitalisation of around $62 billion.
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Motley Fool contributor Marc Sidarous has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of Wesfarmers Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.
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