Wesfarmers sitting pretty

What do investors want? The news, released at about the same time as the PacDun break-up came to light, was designed to avoid exactly the problems of that troubled blue chip conglomerate.

Wesfarmers of course is in a different league to PacDun, but the complexity of its structure is always a problem in these more streamlined core-focused times and it would have been reasonable to expect the simplification announced by Chaney would be well received.

Delivering flexibility

We're not too concerned. The analysts and institutions will come to see that the move is a very good one. Freeing the company from the 49% ownership by the founding farmers co-op puts Wesfarmers on the front foot for growth over the coming years by delivering flexibility.

We are very happy with our record on the stock. Subscribers who followed our issue 61 recommendation (Accumulate - $13.83) have seen gains of 35.2% in just over three months.

Maybe the markets were exhausted by good news out of Wesfarmers. In the past we have spoken approvingly of Wesfarmers takeover of 100% of rural services firm Iama and we're pleased to see that moving ahead with Nufarm and Futuris agreeing this week to sell their 19 per cent stakes.

Practical approach

Not that that is going to be achieved overnight. Chaney himself is being conservative in his expectations of melding the companies quickly. No concerns there, rather it's a careful practical approach to a problem often glossed over in macho acquisitions, but one we pay a great deal of attention to. It is so easy to lose the goodwill of staff and customers when bringing together different corporate cultures and caution is to be applauded.

We think that the most logical explanation of the dip in Wesfarmers' share price is to be found in the history of this stock.

Because it is a conglomerate – albeit a well-run one – its structure is inherently complex and so it takes analysts and investors some time to digest the implications of restructuring. That has certainly been the case in the past when the market has often taken time to cotton on to what the company's up to. But in the end, they are seldom disappointed. ACCUMULATE.