Another seemingly never-ending saga in Australia, one of the world’s most active buy-out markets, took yet another twist on Thursday as local media reported that TPG and its consortium had dropped out of the bidding for Coles, one of the country’s main supermarket chains. That would leave Wesfarmers, Australia’s biggest home improvement retailer, as the sole bidder for all of Coles Group, reports Bloomberg.
Coles denied a report in the Australian Financial Review (subscribers only) that TPG and its partners, Carlyle and Blackstone, had withdrawn from the bidding, insisting it was set to meet the consortium’s bankers on Thursday. A representative of the group later said the consortium members “have not announced”‘ their withdrawal.
But it didn’t look good for Coles, particularly in light of the withdrawal of KKR and CVC from the consortium last month after spending two weeks examining Coles’ financial data.
Investors certainly seemed convinced the bidding party was winding down, as Coles shares nosedived on the news, falling 35 cents, or 2.1 per cent, to A$16.55 at the close of trade in Sydney, giving the company a market value of A$19.8b, ($16.7bn).
At this price, the retailer is still better value – but only just – than the $16.47 indicative offer that Wesfarmers made in April, notes the Sydney Morning Herald.
Members of the TPG-led group had been in discussions with Woolworths, Coles’ bigger rival, to join the remaining partners. But consortium members indicated on Wednesday night they would abandon their bid after the Woolworths talks broke down, the SMH added.
Coles is now likely to consider a break-up of the group to encourage Woolies to stay in the race against Wesfarmers. However, the odds of a break-up and a Woolies success are low.
The earlier withdrawal of KKR and CVC after due diligence suggested “the numbers are far from pretty”, noted Lex at the time, adding that the situation had probably deteriorated since the previous bid for Coles. Australian shoppers are “probably in for a long wait before a new owner takes charge of the tills at Coles,” it concluded back then.
Even longer now.