Quadrant is one of Australia’s leading oil and gas companies, with a portfolio of producing assets and prospective exploration targets.
The other shareholders include Brookfield Asset Management (36.2%), Macquarie Group Ltd (ASX: MQG) (21.8%), AMB Holdings (13.2%), CDPQ (12.1%) and Quadrant management (3.4%).
Santos is acquiring 100% of Quadrant Energy for US$2.15 billion plus potential contingent payments related to the Bedout Basin. Santos is funding it from existing cash resources and new committed debt facilities.
The Wesfarmers stake is being sold for approximately US$170 million. Once the transaction has been completed Wesfarmers has calculated a pre-tax profit of approximately US$98 million.
The transaction will also provide Wesfarmers a contingent value right in relation to the recent Dorado-1 oil discovery and royalty over Quadrant’s tenements in Western Australia’s Bedout Basin.
Wesfarmers Managing Director Rob Scott said “Our investment in Quadrant has demonstrated the benefits of Wesfarmers’ disciplined approach to portfolio management through flexible ownership structures.”
This sale adds to a number of strategic moves that Wesfarmers has made in recent months. It ended the Bunnings UK & Ireland expansion, sold Kmart Tyre & Auto and will soon be divesting Coles.
Wesfarmers is trading at around 19x FY19’s estimated earnings with a grossed-up dividend yield of 6.3%.
The conglomerate now has a lot of cash. With the rise in the share price I’d be cautious about jumping in today until we learn about what businesses or sectors Wesfarmers management will be concentrating on for future growth.
Until then, I’d rather buy shares of this top ASX growth share which just grew profit by around 30%.
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Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Wesfarmers Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.