SYDNEY (Dow Jones)–The A$19.7 billion bid for Australia’s Coles Group Ltd. (CGJ.AU) from a consortium including Wesfarmers Ltd. (WES.AU) and private equity looks to be a reasonable price, said an institutional shareholder and an analyst Tuesday.
However, they said other interested parties could well emerge with a better offer, although Wesfarmers’ late Monday raid on the retailer may make a friendly bid difficult for rivals.
“My initial reaction is it seems like a reasonable price, but I’d need to have a look at the details,” said Paul Xiradis, director of equities at Ausbil Dexia, which holds shares in Coles.
“But I suspect there are others which could also come over the top of them with a higher price.”
Unveiling the biggest takeover bid in Australian history, Wesfarmers late Tuesday offered A$16.47 a share for Coles. Wesfarmers, a diversified conglomerate which secured an 11.3% stake in Coles in a Monday share raid, said under the plan its consortium partners Macquarie Bank Ltd., and buyout funds Permira and Pacific Equity Partners would own Coles supermarkets business. Wesfarmers would take control of its Officeworks and Target divisions.
The raid pits Wesfarmers against a consortium led by Kohlberg Kravis Roberts & Co. and including five other global buyout funds in the battle for Coles. Coles knocked back a revised A$15.25 a share from KKR in October last year but put the company up for sale five months later after issuing a profit downgrade and revealing lagging supermarket sales.
Grant Saligari, an analyst at Commonwealth Securities, said the Wesfarmers bid is “certainly within the A$16-A$17 range we’d been looking at.” Coles shares, now subject to a trading halt, last traded at A$16.11.
Wesfarmers’ raid on Coles could make it difficult for KKR to now move forward with a friendly bid.
“Whether KKR responds or not will probably depend on the response from the Coles board,” said Saligari.
“KKR has indicated in the past that it would want to do due diligence and wanted a friendly approach. With Wesfarmers owning 11% of the stock, that could make that less likely. A few things are up in the air at the moment.”
-By Rebecca Thurlow, Dow Jones Newswires; 61-2-8235-2959; rebecca.thurlow@dowjones.com
-Edited by Ian Pemberton
(END) Dow Jones Newswires
April 03, 2007 05:29 ET (09:29 GMT)
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