Wesfarmers, one of the suitors for Coles Group, plans to sell off the Australian retail giant’s food stores in “three to five years” should it prevail in the takeover battle for the company.
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Wesfarmers, which heads one of two consortiums that have entered bids for Coles, told just-food today (11 April) that it would join forces with private equity groups to “turn around” the group’s supermarket operations.
“It will be a typical private equity strategy over a three- to five-year time span to turnaround the business and we’ll decide what to do at the end of that time frame,” a Wesfarmers spokesman said. “Then we’ll be more likely to dispose of the business in better shape.”
The spokesman said Wesfarmers, which owns the Bunnings hardware chain, saw Coles’ stationery unit Officeworks, as a “beautiful” fit for its business, which has interests in areas ranging from home improvement to insurance. However, he insisted that Wesfarmers wants to participate in reviving Coles’ supermarket business, which includes Coles, Bi-Lo and Liquorland outlets.
The spokesman said: “There needs to be a turnaround of parts of the business, what Coles calls its ‘everyday needs’ business in food, liquor and general merchandise. We are very interested in participating in that turnaround; we’re not into buying them and then just flogging them to someone else.”
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By GlobalDataThe Wesfarmers-led consortium, which includes Australia’s Macquarie Bank and two private equity groups, Permira Holdings and Pacific Equity Partners, faces competition from a second syndicate, led by private equity group KKR.
The KKR-led group, which also includes private equity groups Bain, CVC and Blackstone, plans to match the Wesfarmers bid of A$16.47 (US$13.59) a share. The Wesfarmers offer values Coles at around A$19.7bn. Officials at KKR and its bid partners were unavailable for comment as just-food went to press.
Coles is set to open its books to the two bidders in the coming days. The Wesfarmers spokesman the company hoped to start the process “in the next 24 hours or so”.
A Coles spokesman declined to comment beyond the group’s announcements to the market. He also refused to be drawn on reports linking Tesco, the UK’s largest retailer, in a possible bid for Coles.
However, just-food understands that other parties, outside the Wesfarmers and KKR consortiums, have registered an interest in Coles.
For its part, Wesfarmers believes its offer is the best available to Coles shareholders. “We think our offer is superior to anything else that’s on the table,” the Wesfarmers spokesman said. “It doesn’t require regulatory approval and it we think it is a strong offer as the business will remain in Australian control. We’re not concerning ourselves about any other parties at all.”
