By Craig Zammit
SYDNEY: Australia’s biggest home-improvement retailer, Wesfarmers Ltd., has beaten rivals Kohlberg Kravis Roberts & Co. and TPG Inc. in its bid to buy Coles Group Ltd. and has agreed to a record $20.7 billion take-over.
Wesfarmers will now assume ownership of Kmart and Target as well as Coles’ 3,000 supermarkets, its liquor outlets and office supply stores, with Coles shareholders to get $17.25 in cash and stock – seven percent more than the 29 June closing price.
Chief executive officer, Richard Goyder, stated today that he intends to revive Coles’ record slow sales and win back customers from rival Woolworths Ltd, while Citigroup Inc. analyst, Craig Woolford, stated that closing the increasing gap in sales between Coles and rival Woolworths would be a “huge challenge for any owner”.
“A new owner of Coles must arrest the decline in market share and actually build sales per square meter to drive improved profitability,” said Woolford before today’s announcement.
Wesfarmers’ buyout partners Permira Holdings Ltd. and Pacific Equity Partners withdrew offers just prior to the deadline, with Goyder choosing to proceed with a bid for the larger company.
With the bid, investors will now receive 0.2843 Wesfarmers shares for each Coles share as well as $4 cash, being entitled to Coles’ 25 cents-a-share second-half dividend. Prior to the takeover, Wesfarmers owned 12 percent of Coles after buying a stake in April at $16.47 a share.
Coles shares fell 10 percent from the record $17.95 set on 14 May this year as the outlook of a bidding war decreased.
The Perth-based Wesfarmers shares closed Friday at a record $45.73, with the company valued at $17.7 billion.