By Sarah Falson
SYDNEY: Bunnings’s parent has entered the $20 billion auction for the troubled Coles retail group and bought a strategic $3 billion stake in the supermarket retailer, propelling rumours that it has its eyes on the retailer’s $1.1 billion Officeworks business.
Coles, Australia’s second-largest retailer, was put on the market by chairman Rick Allert on 23 February, after it posted serious profit losses of $106 million on the Australian Stock Exchange (ASX) for the half-year ending 28 January 2007 – the highest loss reported by the retailer in seven years.
South Australian Wesfarmers, best known for its Bunnings hardware chain, is heading up the bid for the supermarket chain along with backers Macquarie Bank, Pacific Equity Partners and European buy-out firm Permira.
Last night the consortium staged a share raid of $3 billion, which at $16.47 per share when completed was well above the $15.25 offered by US private equity raider Kohlberg Kravis Roberts last year.
Wesfarmers has now bought 126.7 million shares or 11.3 per cent of the Coles Group and today successfully administered a trading halt on the Australian Securities Exchange, meaning that another important announcement could ensue.
Investment company Premier Investments Limited also entered into agreements today to sell its 5.9 per cent share of the Coles Group.
Coles, formerly Coles Myer, sold its Myer department store arm for $1.4 billion to American private equity firm, Newbridge Capital, last year, announcing that the two groups would be better served with separate management units.
Indeed, Myer posted favourable profits for the six months ended 28 January 2007, with EBIT up a whopping 84 per cent to $123 million, after cutting costs and minimising in-store discounting.
Meanwhile, Coles last week ditched a plan to transform all its Bi-Lo supermarkets to Coles outlets, after receiving unfavourable sales in those stores which had already been transformed.
The Coles Group is now considering selling its other assets separately – including mass merchant chains Target and Kmart.