Australian grocery retailer Coles Myer has joined the battle for Australia Leisure and Hospitality with a A$1.18bn (US$0.85bn) offer for the pub group.

Coles Myer joined with Macquarie Bank in its offer of A$3.35 per share, beating an offer of $3.15 per share from a group led by rival supermarket group Woolworths, reported the Financial Times.

The board of ALH, which is the country's third-largest liquor retailer and its largest pub operator, recommended shareholders accept Coles Myer's offer in the absence of a higher bid.

ALH operates 130 pubs and 260 liquor outlets, controlling a 4% share of Australia's liquor retail market.