Partially protected shares

Wesfarmers partially protected shares were a class of Wesfarmers ordinary shares issued to former shareholders of Coles Group Limited under the Scheme of Arrangement approved by Coles Group Limited shareholders on 7 November 2007.

On Thursday, 21 November 2013, Wesfarmers advised that the trigger for the early reclassification of Wesfarmers partially protected shares into Wesfarmers ordinary shares had occurred. As a result, partially protected shares were reclassified into Wesfarmers ordinary shares on Monday, 9 December 2013 on a one for one basis. Please find below some further information regarding the partially protected shares and their reclassification into ordinary shares.

Holders of partially protected shares do not need to do anything in relation to the reclassification.

General information

WESN terms of issue

Related releases

Reclassification of partially protected shares

Background to reclassification

What does the reclassification of partially protected shares mean? 
Wesfarmers partially protected shares were a class of Wesfarmers ordinary shares issued to former shareholders of Coles Group Limited under the Scheme of Arrangement approved by Coles Group Limited shareholders in 2007. The partially protected shares traded on the ASX under the code WESN.

Wesfarmers announced on Thursday, 21 November 2013 that the trigger for the early reclassification of Wesfarmers partially protected shares into Wesfarmers ordinary shares had occurred.

As a result, partially protected shares were reclassified into Wesfarmers ordinary shares on Monday, 9 December 2013 on a one for one basis.

Additional background

Wesfarmers partially protected shares were originally issued to former Coles Group Limited shareholders to provide a level of downside protection.

Under the terms and conditions of issue of the partially protected shares (Terms of Issue), there were a number of circumstances under which the reclassification of partially protected shares into ordinary Wesfarmers shares could occur. The trigger for early reclassification of all partially protected shares that was announced on Thursday, 21 November 2013 was one of those circumstances.

Under clause 6 of the Terms of Issue, partially protected shares were to be automatically reclassified into Wesfarmers ordinary shares on a one for one basis, with no additional or bonus Wesfarmers ordinary shares to be issued to owners of partially protected shares if the volume weighted average sale price of Wesfarmers ordinary shares, or VWAP, as defined in the Terms of Issue, over any consecutive period of 20 business days exceeded the cap price of $43.11.

The VWAP of Wesfarmers ordinary shares over the period from Thursday, 24 October 2013 to Thursday, 21 November 2013 was $43.162, triggering an early lapse reclassification under the Terms of Issue.

Was shareholder approval required for the reclassification?
No. Shareholder approval was not required for the reclassification, as early reclassification of partially protected shares occurred automatically under the Terms of Issue of the partially protected shares.

What is the impact of the reclassification on my partially protected shares?
Under the Terms of Issue of the partially protected shares:

  • partially protected shares were automatically reclassified into Wesfarmers ordinary shares on Monday, 9 December 2013, so there are no Wesfarmers partially protected shares from Monday, 9 December 2013;
  • the rights and restrictions conferred on each partially protected share under the Terms of Issue no longer apply; and
  • partially protected shareholders have no entitlement to be issued with ordinary shares in addition to those that were reclassified.

Following the reclassification on Monday, 9 December 2013, your partially protected shares were reclassified into ordinary shares. The amount of ordinary shares in Wesfarmers you hold has increased by the amount of partially protected shares you held, and your partially protected shareholding has reduced to zero.

Given the reclassification, partially protected shares were removed from quotation on the ASX folllowing the close of trading on Friday, 6 December 2013.

What do I need to do?
Holders of partially protected shares do not need to do anything in relation to the reclassification.

The reclassification occurred automatically on Monday, 9 December 2013, and holders will receive a separate letter in mid-December 2013 setting out the changes to their shareholding following the reclassification process.

Where do I get the Terms of Issue?
The Terms of Issue are available here.

When will the reclassification occur?
Partially protected shares were reclassified into Wesfarmers ordinary shares on Monday, 9 December 2013 on a one for one basis.

Will I get to keep my partially protected shares?
No. As a result of the reclassification, you have received one Wesfarmers ordinary share for each partially protected share that you held on the reclassification date. Wesfarmers partially protected shares are no longer trading.

What rights attach to a partially protected share?
Partially protected shares had the same rights as those of Wesfarmers ordinary shares, including in relation to:

  • voting rights;
  • dividends;
  • participation in surplus assets and profits on winding up; and
  • returns of capital.

In addition to these rights, Wesfarmers partially protected shareholders were entitled to bonus shares under the Terms of Issue if certain conditions were met. As these conditions were not met before the reclassification trigger was announced on Thursday, 21 November 2013, the partially protected shares were reclassified  into Wesfarmers ordinary shares and are no longer entitled to bonus shares in Wesfarmers.

Why don’t I get any bonus shares?
The conditions for the issue of the bonus shares were not satisfied prior to the early reclassification trigger that was announced on Thursday, 21 November 2013. Partially protected shareholders no longer have an entitlement to be issued with ordinary shares in addition to those that were reclassified.

Under the Terms of Issue:

  • partially protected shares were automatically reclassified into Wesfarmers ordinary shares on Monday, 9 December 2013, so there are no Wesfarmers partially protected shares from Monday, 9 December 2013;
  • the rights and restrictions conferred on each partially protected share under the Terms of Issue no longer apply; and
  • partially protected shareholders have no entitlement to be issued with ordinary shares in addition to those that are reclassified.

How is the VWAP calculated?
The VWAP is defined in the Terms of Issue. It is the volume weighted average sale price of ordinary shares sold on ASX, excluding special crossings and other certain trades, as outlined in the Terms of Issue.

As soon as the VWAP over a period of 20 consecutive business days exceeded the cap price of $43.11, an early reclassification trigger occurred. There was no need for the VWAP, or the share price, to remain above the cap price of $43.11 for any particular period of time after the reclassification trigger occurred.

What happens if my trade in partially protected shares did not settle before Monday, 9 December 2013?

Trades in partially protected shares that were not settled prior to Monday, 9 December 2013 will be settled as reclassified ordinary shares on a one for one basis on and from Monday, 9 December 2013.

What will happen to the WESN code on the ASX?
 All Wesfarmers ordinary shares, and partially protected shares that were reclassified into ordinary shares, trade under the WES code, effective Monday, 9 December 2013. Given the reclassification, partially protected shares were removed from quotation on the ASX following the close of trading on Friday, 6 December 2013.

Changes to WESN Terms of Issue

Why did Wesfarmers extend the reclassification date to Monday, 9 December 2013?
Under the Terms of Issue, the reclassification was to take place prior to the commencement of trading on the last business day of the month in which the early reclassification trigger occurred. This would have coincided with the period during which settlement of deferred trades associated with the capital return and share consolidation was occurring.

Accordingly, the Board amended the reclassification date, in accordance with the Terms of Issue, so that the reclassification date was Monday, 9 December 2013. This allowed sufficient time for deferred trades associated with the capital return and share consolidation to settle prior to the reclassification of partially protected shares.

What gives Wesfarmers the right to extend the reclassification date without shareholder consent?
The Terms of Issue of the Wesfarmers partially protected shares were able to be altered without the approval of holders of Wesfarmers partially protected shares where the amendments were considered by Wesfarmers not to be materially prejudicial to the interests of holders of Wesfarmers partially protected shares as a whole.

The Board amended the reclassification date, in accordance with the Terms of Issue, so that the early lapse reclassification date was Monday, 9 December 2013. This allowed sufficient time for deferred trades associated with the capital return and share consolidation to settle prior to the reclassification of partially protected shares.

The Board determined that the amendment to the reclassification date to Monday, 9 December 2013 was not materially prejudicial to the interests of partially protected shareholders as a whole, and was in accordance with the Terms of Issue of the partially protected shares.

Did the early reclassification of partially protected shares occur because the terms of the partially protected shares were amended as part of the share consolidation and capital return?
Neither the reduction in the floor price or the change to the conversion ratio that were made to the Terms of Issue of the partially protected shares as part of the share consolidation and capital return had any impact on the early reclassification that was announced on Thursday, 21 November 2013.

Has the lapse date for the partially protected shares changed?
The original lapse date was four years from the date of issue of the partially protected shares (which was 23 November 2011).

However, under clause 3 of the Terms of Issue, Wesfarmers was entitled to extend the lapse date for a 12 calendar month period if the ASX200 Industrial Index was below 6,500 at the close of trading for each trading day during the two month period before the lapse date. Wesfarmers extended the lapse date on two occasions. When the early reclassification was announced on Thursday, 21 November 2013, the lapse date was 23 November 2013. Wesfarmers was able to exercise the right to extend the lapse date no more than four times, subject to certain terms consistent with the Terms of Issue.

As the early reclassification trigger under clause 6 of the Terms of Issue that was announced on Thursday, 21 November 2013 occurred first, before the expiration of the lapse date under clause 2 of the Terms of Issue, the lapse date was no longer relevant.

Shares were reclassified on a one for one basis on Monday, 9 December 2013 as a result of the reclassification trigger that occurred on Thursday, 21 November 2013.

The cap price was originally $45. Why is it now $43.11?
When the Wesfarmers partially protected shares were first issued, the cap price was $45.00 per share. As a result of two capital raisings that took place in April 2008 and in January 2009, after the partially protected shares were issued, the cap price was reduced to $43.11.

On those occasions, Wesfarmers adjusted the cap price under clause 11 of the partially protected shares Terms of Issue which permitted it to do so to maintain the relative values of the partially protected shares and Wesfarmers ordinary shares in those circumstances.

Relationship with share consolidation and capital return

What does this have to do with the capital return and share consolidation?
Even though the reclassification of partially protected shares occurred around the same time as the capital return and share consolidation, the events were independent.

On Tuesday, 26 November 2013 Wesfarmers sent shareholders a letter setting out their shareholding following the share consolidation, together with details of their capital return payment.

If you were a partially protected shareholder, you will be sent another letter in mid-December 2013 setting out the changes to your shareholding following the reclassification of partially protected shares.

Will I still receive a capital return for my partially protected shares?
The record date for the capital return was 4pm (Perth time), on Friday, 15 November 2013. Your capital return payment was calculated on the number of partially protected shares and ordinary shares that you held at that time.

On Tuesday, 26 November 2013 Wesfarmers sent shareholders a letter setting out their shareholding following the share consolidation, together with details of their capital return payment.

Will my partially protected shares still be consolidated?
The share consolidation occurred on Monday, 18 November 2013. Your partially protected shares were consolidated at that time, in the same way as all Wesfarmers ordinary shares were consolidated.

On Tuesday, 26 November 2013 shareholders were sent a letter setting out their shareholding following the share consolidation, together with details of their capital return payment.

Is the early reclassification of partially protected shares related to the amendments to the Terms of Issue of the partially protected shares as part of the share consolidation and capital return?
Neither the reduction in the floor price nor the change to the conversion ratio that were made to the Terms of Issue of the partially protected shares as part of the share consolidation and capital return had any impact on the early reclassification that was announced on Thursday, 21 November 2013.

Tax information

A Wesfarmers shareholder tax information guide for the partially protected share reclassification is available here.

Shareholders are encouraged to seek their own professional advice in relation to the taxation implications of the reclassification of Wesfarmers partially protected shares.

A copy of the Class Ruling (CR 2007/114) that was obtained from the Australian Taxation Office in relation to the Coles acquisition that refers to the partially protected shares issued to former Coles Group Limited shareholders is available here.

Other queries

Will I still get dividends from my partially protected shares?
Partially protected shares were reclassified on a one for one basis into Wesfarmers ordinary shares. You will continue to be entitled to any dividends that are declared in the future in relation to Wesfarmers ordinary shares.

What happens to my dividend investment plan election?
After the reclassification any dividend investment plan elections that you have previously made on your partially protected shares no longer apply.

If you already held ordinary shares, the dividend investment plan election that applies to your ordinary shareholding also applies to your newly reclassified shares.

If you only held partially protected shares, you need to update your dividend investment plan elections if you wish to elect to participate in the dividend investment plan. An application can be obtained online here or by contacting Wesfarmers' Share Registry, Computershare Investor Services Pty Ltd on 1300 558 062 (within Australia) or +61 3 9415 4631 (outside Australia).

Key dates

21 November 2013

  • Trigger for early reclassification reached

9 December 2013

  • Early Reclassification date

Additional information

If shareholders have any queries on any of the matters referred to above, please contact Computershare Investor Services Pty Ltd on 1300 558 062 (within Australia) or +61 3 9415 4631 (outside Australia).

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