The board of Australian supermarket chain Coles Myer has rejected a buyout proposal from a consortium bidding to acquire the company for a price of A$14.50 (US$11.13) per share.

Coles said that the conditional proposal, received on 18 August, substantially undervalued the company and its prospects and was not in the best interests of shareholders.

The company’s share price has jumped more than 17% since the approach three weeks ago.

Coles Myer chairman Rick Allert said: “With such a conditional proposal, the consortium is effectively seeking a free option over the company.

“The indicative price proposed substantially undervalues a unique and exceptional group of businesses which have more than doubled profitability and earnings per share over the past five years, and which produce a return on investment of nearly 30%.”

The company added that the proposal gave no certainty on the availability of debt finance, or of the leveraged buyout consortium’s own equity finance, and provided no clarity on the terms and conditions of a proposed scheme of arrangement with Coles.

“The consortium’s timing and indicative price are highly opportunistic. Since its approach to the company, the consortium has merged with a potential rival, clearly indicating it seeks to acquire Coles Myer in an environment of the least competition and for the lowest price.

“The board has no intention of handing across billions of dollars of value that belongs to our shareholders to a third party,” Allert said.

Coles revealed that the participants in the syndicate presently comprise Bain Capital,
Blackstone, Carlyle, CVC, KKR, Macquarie Bank, Merrill Lynch, Texas Pacific/Newbridge and PEP.