PRIVATE equity firms are preparing a A$16 billion (£6.4 billion) bid for the Coles Myer supermarket chain in a deal that could become one of the biggest in Australia’s history. The Times understands that Kohlberg Kravis Roberts, the Carlyle Group and CVC Asia Pacific are working together on a buyout.
The struggling supermarket group admitted yesterday that it had received an approach from “interested parties” and its shares rose 12 per cent to A$13.10 in anticipation of a bidding war.
Another private equity consortium, consisting of Pacific Equity Partners and Bain Capital, is also thought to be interested and persistent rumour surrounds Wal-Mart’s ambitions in Australia.
Wal-Mart, the world’s largest retailer, refused to comment yesterday.
Other potential bidders for Coles could include European food giants such as Tesco and Carrefour. However, with limited synergies available to these companies, analysts do not expect them to become involved. The KKR consortium is understood to be being advised on the buyout by UBS, the Swiss bank.
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If Coles is bought by a private equity consortium it will be the second big supermarket group taken private this year. CVS and Cerberus Capital bought the US-based Albertsons chain for US$17.4 billion (£9.2 billion) in January.
The dominance of private equity bidders for both Coles and Albertsons demonstrates the difficulty that supermarket groups now face in growing by acquisition.
These retailers have become so big, and their supply chains so complex, that trade mergers and takeovers are becoming unattractive — as Wal-Mart’s recent difficulties in Germany and South Korea, as well as Morrison’s complicated merger with Safeway, demonstrate.
This is likely to mean that supermarket retailers will have to concentrate on organic growth in the future.
Coles said yesterday that it would consider any legitimate offers put to it but remained committed to a restructuring plan announced two weeks ago involving rebranding as Coles Group.
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It will reorganise its operations into three business groups after the sale of its Myer department stores. The new business groups will be Coles, selling food, liquor, fuel and general merchandise, the Target discount stores business, and the home office supplier Office Works.
Coles Myer was once the largest retailer in Australia, but it has stumbled in recent years. It sold the Myer department store division to Newbridge Capital, another private equity group, for A$1.4 billion two months ago and the supermarket division has struggled to compete with the rival Woolworths.
Analysts believe that bidding for Coles could reach A$15 a share, or A$16 billion. Australia’s largest acquisition so far was SingTel’s A$17.2 billion acquisition of Optus in 2001.
Trevor Coates, the former chief executive of the Australian supermarket chain Foodland, who now heads Instore in the UK, said: “Since Coles got rid of its non-food business, which has always been a drag on performance, it has been an attractive proposition.”