Aussie Bidding War

A consortium led by Kohlberg Kravis Roberts (New York) may top the $16.1 billion offer for Australian retailer Coles Group Ltd. (Tooronga, Australia) currently on the table from Wesfarmers Ltd. (Perth, Australia).

Coles chairman Rick Allert said in a statement that KKR was confident it could equal or beat the Wesfarmers bid price for Coles, which put itself up for sale in February. Last year, Coles rejected a KKR-led offer.

Coles urged shareholders not to sell until the board had considered all alternative proposals, and said it had not indicated it would recommend Wesfarmers' offer. Rob Patterson, managing director of Argo Investments Ltd. (Adelaide, South Australia) and holder of 2.6 million Coles shares, said he would wait for the board's recommendation, but noted Wesfarmers' bid would allow shareholders to take part in the company's improved performance.

Wesfarmers, which owns the Bunning chain of hardware stores in Australia, has already won the backing of privately owned Hedley Group (Queensland, Australia), taking its voting control in Coles to 12.8 percent. A spokesman for Wesfarmers said the company would take out advertisements in Australian newspapers this week to reach Coles' 350,000 shareholders, most of whom own less than 10,000 shares. The company's strong Australian focus would be mentioned, he said. Foreign ownership is often a sensitive issue for Australian companies.

Woolworths Ltd. (Bella Vista, Australia), the continent’s largest retailer, declined to comment on a report in the Wall Street Journal that it was considering joining with private equity in a bid for Coles. Woolworths has expressed interest in the past in Coles' Officeworks and Target units, but would likely face an insurmountable obstacle with competition regulators in a bid for all of Coles. Woolworths holds about 40 percent of the food and liquor market in Australia, against around 35 percent for Coles.