SYDNEY: A consortium of companies has made a bid that would amount to the largest-ever takeover attempt in Australia, offering to take a substantial stake in the troubled Coles Group on terms that values the retail conglomerate at about 19.3 billion Australian dollars.
The bidding consortium, led by Wesfarmers, a diversified business group, offered to buy an 11.
3 percent stake in Coles on Monday. The bid is equivalent to $15.7 billion.
Coles, the second-largest retailer in Australia after Woolworths, put itself up for sale after announcing that half-year results had disappointed investors and that it was cutting its earnings forecast for the year by 10 percent.
"We believe the acquisition of Coles would be a very positive step for the shareholders of both companies," Richard Goyder, managing director of Wesfarmers, said Tuesday in a filing with the Australian Securities Exchange.
Coles said that it had entered negotiations with the intention of agreeing to an accelerated timetable for due diligence.
The indicative bid by Wesfarmers of 16.47 dollars per share is a significant premium on the Monday closing share price of 16.11 dollars and on many analysts valuations of 15.
90 dollars to 16 dollars a share.
But some analysts said that the company could be worth up to 21 dollars a share if it were better managed. "The right management could lift the share price by 30 percent," said Scott Marshall of Shaw Stockbroking in Sydney.
A spokesman for Wesfarmers, Keith Kessel, said that some of the stake the company bought Monday was on an "escalator" deal, which means that if the bid price rises, Wesfarmers would pay extra for some of the shares it had already secured.
The other members of the consortium include Macquarie Bank, based in Sydney; Pacific Equity Partners, an Australasian private equity concern, and Permira, a European company that recently bought a number of Spanish retailers.
Few analysts doubt that Coles presents substantial potential for improvement.
Last year, the group sold its underperforming Myer department store to the private equity group Texas Pacific for 1.4 billion dollars. Last week, Myer announced an 84 percent increase in half-year earnings.
"Prospective buyers will look at Myer as reassurance that good and focused management ought to be able to add substantial value to businesses that have carried the dead weight of a distant and bloated bureaucracy" at Coles, said Stephen Bartholemeusz, a columnist for The Age, a Melbourne newspaper.
Wesfarmers already has retail experience. It owns Bunnings, the largest chain of home improvement shops in Australia, along with diversified assets in a range of industries including coal, insurance and gas.
Wesfarmers, based in Perth, told the securities exchange Tuesday that it intended to hold about 50 percent of Coles food, liquor and general merchandise businesses and to take over completely Officeworks and Target, which sell office supplies and homewares, respectively.
Coles has been a perennial target for takeover. A private equity consortium led by Kohlberg Kravis Roberts made two unsuccessful bids last year.
The Coles board rejected the last bid in October, saying that the 15.25 dollar per share bid undervalued the company.
This time, Coles has tried to control the sales process.
To encourage a greater number of participants in the auction, and therefore a better price, Coles said it would consider breaking up the group. It has also tried to limit the number of private equity groups that could participate in any one bid.
Wesfarmers has built a blocking stake that is likely to put off other potential bidders for Coles.
Any other buyer would have to negotiate with the Wesfarmers consortium, and the premium the group has paid is likely to be a deterrent.
Although there have been no formal declarations of interest, the Australian media has speculated that other retail groups like Tesco of Britain and Carrefour of France might also consider a bid.
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