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A bidding war looms for Coles Group after a Kohlberg Kravis Roberts-led consortium told the retailer it may top a A$19.7 billion ($22.6 billion) bid by Wesfarmers, pushing Coles shares to a record high.
Coles, Australia's second-largest retailer, has already attracted the country's biggest takeover offer from Wesfarmers, a home improvement-to-energy conglomerate, at A$16.47 a share. Last year, Coles rejected a KKR-led offer of A$15.25 a share.
"It looks like it could turn into a bidding war. KKR have obviously done a lot of work on Coles," said Constellation Capital Management analyst Richard Norris, a Coles shareholder.
Coles chairman Rick Allert said yesterday that KKR was confident it could equal or beat the Wesfarmers bid price for Coles, which put itself up for sale in February. Coles shares rose 2.7 per cent to A$17.42, well above the Wesfarmers' offer, in an overall market up 1.1 per cent.
Constellation's Norris said Wesfarmers could "just as happily" take a profit on its Coles stake if KKR comes up with a higher offer.
Potential bidders will get a look at Coles' books this week, in a process that has been accelerated by Wesfarmers' surprise offer last week.
KKR, with other private-equity firms Bain, CVC, Blackstone Group, Carlyle Group and TPG, will be looking for more detail on what Coles is worth.
Coles did not engage in detailed discussions last year with KKR, which made two failed bids.
Coles urged shareholders on Monday not to sell until the board had considered all alternative proposals.
Perth-based Wesfarmers has won the backing of privately-owned Hedley Group, taking its voting control in Coles to 12.8 per cent.
The Myer department store chain, which was sold by Coles last year, turned in an 80 per cent profit increase last month under new private equity owners, raising hopes for a turnaround at Coles, which has lost market share to larger rival Woolworths.
A spokesman for Wesfarmers said the company, which owns the Bunnings hardware chain, would take out advertisements in Australian newspapers this week to reach Coles' 350,000 shareholders, most of whom own less than 10,000 shares.
- REUTERS
