Rival consortium challenges KKR for Coles(2)

A consortium that includes Pacific Equity Partners, Permira and Wesfarmers, a Sydney-listed conglomerate, has bid A$19.7 billion for Coles Group, Australia’s second-biggest retailer – although KKR could yet return with another bid.

Coles Group, an under-performing Australian retail chain that recently rejected a buyout offer from Kohlberg Kravis Roberts, has received a A$19.7 billion ($16 billion) offer from a rival consortium led by Australian retail conglomerate Wesfarmers.

The consortium led by Wesfarmers also includes private equity firms Permira and Pacific Equity Partners, and Australian bank Macquarie. If its bid is successful, it would be Australia’s largest ever buyout.

Under the terms of the deal, Wesfarmers would own 50 percent of the Coles Group, with Permira taking 30 percent, Pacific Equity Partners 15 percent, and Macquarie Bank 5 percent.

Earlier this week, Wesfarmers bought an 11.3 percent stake in Coles in an attempt to facilitate the buyout.

KKR, which is operating in conjunction with The Carlyle Group, CVC Capital Partners, Blackstone and Texas Pacific Group, had an A$18.2 billion bid rejected by the Coles board in October. However, there is widespread speculation that the consortium is preparing to bid again.

Other private equity firms rumoured to be stalking Coles include Apax Partners, CCMP Capital Asia and US-based Cerberus Capital Management.

Chairman Rick Allert put Coles up for sale in February following concerns that the company would not meet profit forecasts.

The deal would be the biggest Australian buyout to date, trumping the A$10.9 billion bid in December for Qantas by a private equity consortium that included TPG.