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Wesfarmers to sell automotive service chain to Continental for A$350M

Australian conglomerate Wesfarmers Ltd. said Aug. 12 it has agreed to sell Kmart Tyre & Auto Service to German auto parts giant Continental AG for A$350 million, the latest in a string of recent restructuring moves by the owner of Coles supermarket chain.

Upon closing of the deal, Wesfarmers estimates a pretax profit from the sale of the tire and automotive service chain of about A$270 million to A$275 million, subject to adjustments.

The transaction, which is expected to be completed in the quarter ending September 2019, still requires certain regulatory approvals, including from the Australian Competition and Consumer Commission and the Foreign Investment Review Board, Wesfarmers said.

KTAS operates 258 stores across Australia with 1,200 employees and was acquired by Wesfarmers as part of the Coles Group in 2007. Continental will use the KTAS name and logo during a transitional period after the sale.

"The acquisition of KTAS marks a major expansion in our presence on the Australian tire market. This move is part of our 'Vision 2025' growth strategy through which we are systematically expanding the worldwide presence of our Tire division," Nikolai Setzer, member of the Continental's executive board and responsible for the Tire division, said in a separate statement.

With the purchase of KTAS, Continental plans to complement its tire, car parts and repair business with services for retail customers as well as for fleet operators in the Australian market, the German company said Aug. 13.

The deal follows Wesfarmers' move to sell its 40% stake in the Bengalla coal mine in New South Wales, Australia, as part of a companywide restructuring, in addition to a deal to off-load its struggling DIY chain Homebase in the U.K. and Ireland. The company also expects to complete the demerger of its supermarket chain Coles in late November and is planning to shutter 20% of the outlets in its department store chain Target in the next five years.

"We believe that the divestment is in the best interests of Wesfarmers' shareholders. ... Continental's automotive industry expertise will further strengthen the business' customer offering," said Wesfarmers Managing Director Rob Scott in a statement.