CVC, KKR pull out of Coles takeover bid

Kohlberg Kravis Roberts & Co has decided to follow CVC Asia Pacific and quit the consortium bidding for Coles Group after two weeks of due diligence on the Australian retail giant. Coles shares have consequently fallen below the A$17.00 mark for the first time since April.

Kohlberg Kravis Roberts & Co, the US buyout firm, pulled out shortly after CVC Asia Pacific indicated on 28 May that it was leaving a private equity consortium bidding for Coles Group, Australia second largest retailer. KKR and CVC leave TPG, The Carlyle Group, Bain Capital and The Blackstone Group to carry on.

The decision by the two buyout firms to retreat from the bidding game comes after two weeks of exclusive access to conduct due diligence on the retailing giant. Local rival Wesfarmers is still interested in buying Coles for $16 billion. Wesfarmers has teamed with Macquarie Bank, Sydney-based buyout group Pacific Equity Partners, and UK private equity firm Permira. The Wesfarmers group commenced due diligence on 25 May.

A spokeswoman for the private equity consortium confirmed the two firms have decided not to pursue the Coles buyout any further, but stopped short of saying if the remaining members of the consortium will press on with a proposed takeover.
“Presumably, the two didn’t like everything they saw after two weeks” of going through Coles’ financial data, she said.

The consortium has been referred to as the KKR consortium until the latest withdrawal of the latter. According to Bloomberg, the consortium is talking to Woolworths, Australia’s largest retailer about joining in the buyout.

Last year, the group lifted an original offer to buy Coles to A$15.25 ($12.48) a share, which the retailer rejected as too low, before it put itself up for offer in February after slashing a profit forecast. Wesfarmer had paid A$16.47 a share to build a 12 percent stake in Coles before it announced it was keen to pursue a buyout at A$17.25, a price the buyout consortium had expressed confidence in matching or beating on 10 April. The private equity consortium hasn’t indicated what it was planning to offer thus far.

Coles share price has dipped below the A$17 mark so far today, for the first time since April, after closing on A$17.38 on 28 May.