Coles Group has rejected the Wesfarmers bid and told shareholders not sell their shares ahead of completion of the board’s ownership review. The plea, made in a statement yesterday, leaves open the possibility of rival bids.
In the statement Coles said it had not indicated that the $16.47 cash per share offer contained in the Wesfarmers-led group’s indicative proposal, would be one that the Coles Board would be prepared to recommend to its shareholders.
“Until such time as Coles’ ownership review has been completed and the Coles Board has made a recommendation to shareholders, Coles shareholders are advised not to sell, or grant economic or voting interests over, their shares,” the company said in a statement.
That means the attempts by Wesfarmers and its partners to get an early recommendation from the board for its bid has failed and Coles is courting bids from other possible suitors.
The statement came a day after Coles shareholder Hedley Group, pledged to support the $19.7 billion offer by pledging its 1.5 per cent stake in Coles to Wesfarmers taking the Perth-based company’s interest to 12.8 per cent.
Coles said it was committed to running a “fully competitive process in evaluating ownership alternatives in order to maximise shareholder value for Coles shareholders”.
Although Wesfarmers had talks with Coles over Easter and is hoping to go through the potential target’s books this week, Coles said the consortium has not yet been granted access to any non-public material from the Coles.
The Coles Group said that a number of interested parties would likely be granted access to the data room to begin due diligence shortly, possibly today.
Coles said that the current interest in voting power in Coles Group securities held by the Wesfarmers-led group was not one that could prevent or deter any alternative ownership proposal for the company.
Well-placed leaks Sunday indicated that Hedley had agreed to say ‘yes’ because of the nature of the offer, if it happens. Wesfarmers has said it will offer shares and cash, which will allow shareholders to rollover their capital gains tax liabilities into Wesfarmers shares.
As well WES has been stressing the ‘Australian’ nature of the bid compared to any possible rival bid from buyout group, KKR and friends.
KKR late last week was reported to have withdrawn from involvement in a private equity approach to UK supermarket group, Sainsbury. Some punters claim it is to concentrate on Coles but the Sainsbury offer had dragged on with some opposition from the board and the Sainsbury family to allowing the buyout group to do due diligence, based on their ‘indicative offer. Sainsbury’s staff superannuation fund also has a substantial deficit which is proving troublesome in negotiations.
There are also claims KKR and friends have been talking to the banking group for the first two ‘offers’ late last year about providing more money for a counter offer to the one from WES.
WES CEO, Richard Goyder said on TV on Sunday that the company was not planning any asset sales. “We’re a diversified business and proud of it, and it has been one of the great strengths of Wesfarmers over time.”
“We don’t need to sell any assets to finance this deal and we look forward to all businesses at Wesfarmers contributing to our future growth,” he told Sky News.
Wesfarmers has teamed with local private equity group Pacific Equity Partners, Macquarie Bank and European buyout fund Permira, is in talks with Coles in an attempt to accelerate the process for due diligence.
The fact that Tom Hedley has said yes after opposing any offer in the wake of the February mea culpa and earnings downgrade, is being sold as a sign that the offer is attracting broad support.
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Meanwhile the Airline Partners Australia’s $11 billion bid for Qantas could reach a pivotal point as early as today or tomorrow with news expected about reports that the banks financing it had lowered their lending requirements to give it a chance of working.
Unsourced reports over Easter suggested that the banks had agreed to refinance it so that APA can take control of the airline without buying 100 per cent.
A new multibillion-dollar debt package was approved in principle by the banks on Thursday (no announcement?) and it will reportedly permit APA to drop a clause that made its $5.45-a-share bid conditional on APA reaching a shareholding of least 90 per cent, where it can compulsorily acquire the outstanding shares.
Qantas shares firmed 7c to $5.25 on Thursday as confidence grew that APA’s bid could be alive.
APA asked the banks to allow it to drop the 90 per cent condition after it became clear that opposition from key shareholders, the Balanced Equity funds management group and UBS Asset Management, made it likely that it would not reach the 90 per cent level.
APA is expected to drop the minimum acceptance condition on the Qantas bid from 90 per cent to 80 per cent. That’s achievable because APA already controls about 31 per cent of Qantas’s shares, and hedge funds that have bought in expecting to profitably sell to APA control another 40 per cent.
Reducing the minimum acceptance condition will, in the long run, make it much easier for APA to get 100 per cent because it will pressure recalcitrant fund managers and other shareholders into selling rather than risk being caught as minority shareholders.
The banks involved are all foreign and have been in the forefront of relaxing credit covenants on loans in the past year in various deals around the globe. They are Morgan Stanley, Deutsche Bank, Citigroup, Goldman Sachs, Royal Bank of Scotland and France’s Credit Agricole/Calyon.
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Watch miner, Oxiana this week; it could be in play, or someone could have made a big, big call about its fu
