Amazon fears kill Officeworks’ $1.5 billion float

THE much-hyped $1.5 billion float of Officeworks has been canned, as Amazon’s impending arrival spooks investors.

THE much-hyped $1.5 billion float of Officeworks has been canned, as Amazon’s impending arrival spooks investors.

Wesfarmers has decided against spinning off the high-performing “mini Bunnings” via an initial public offering due to the market’s current dim view of retailer stocks.

The owner of Coles supermarkets and Bunnings hardware had launched a strategic review into the business in February, but said on Wednesday that an IPO was no longer being considered among its options.

“In light of current equity market conditions, Wesfarmers has determined that an IPO of Officeworks at this point in time would not realise appropriate value and would not be in the best interests of its shareholders,” Wesfarmers said in a statement to the Australian Securities Exchange.

Officeworks had initially been expected to float for about $1.5 billion, but fears of Amazon’s impact on the retail market when it launches in Australia later this year have taken their toll.

Analysts expressed concern over Officeworks’ ability to fight back against the e-commerce giant without the backing of “strong corporate support with deeps pockets like Wesfarmers”.

Retail stocks have also been under pressure from soft consumer spending in recent months.

Wesfarmers managing director Richard Goyder said the group was happy to retain Officeworks and would only divest if it was in the interests of shareholders.

Officeworks has more than doubled its earnings since it was acquired by Wesfarmers in 2007, and has improved its return on capital from 5.7 per cent in the 2009 financial year to 13.9 per cent in the first half of 2016/17.

Its first-half earnings rose 5.1 per cent to $62 million for the six months to December 31.