Oh the ignominy of it all: a struggling corporate so bad that not even two of the most aggressive private equity groups in the world, KKR and CVC, want it.
But that's the bottom line for Coles Group and its shareholders.
And yesterday Coles shares felt the brunt of that ignominy, falling 73c to $16.65, only 40c above Wesfarmers' formal offer price and under the $17.25 a share it used to test the market six weeks ago.
Rival Woolworths jumped 73c to $28.07 and Wesfarmers rose 25c to $38.04.
Coles lost around $800 million in market value; WOW added around $900 million.
At this rate Woolies has no need of any of Coles' assets, its own are doing better and its market reputation is far superior. Woolies could be punished by the market if it buys a Coles business!
A year ago KKR would not have walked from Coles.
It was interested and it showed it by making two bids on behalf of itself and the others in its buyout group.
More importantly Coles was in far better shape: the value destroying defence strategy of killing off the Bi-Lo supermarket chain, revamping and driving Kmart upmarket and the extremely silly idea of the Coles Everyday Needs group for supermarket, liquor, petrol and the revamped Kmarts, was still a dream.
That revamp was devised as the defence to the KKR offers (the last at $15.25). If Wesfarmers and its group were not there, Coles would be very lucky to get an offer at $15.25 after the walkaways of CVC and KKR.
The delay from August – October, when the revamp was drawn up and started, until now has worked against Coles.
Its retailing performance has worsened noticeably. Woolies is so far in front it's not funny and even Metcash, the third supermarket group, will report a better performance next week.
The ill-fated rebranding strategy has caused Coles to lose market share and customer loyalty; the flawed effort to transform the discount Bi-Lo stores the biggest disaster of them all.
How can the remaining four members of the private-equity consortium be confident of Coles' market position and financial health now that the big two in the consortium have walked?
And, while Wesfarmers is in the box seat, does it really want to offer $17.25 or more a Coles share? Is Coles really worth more than $20 billion?
Wes' price should be well north of that price otherwise institutions will be reluctant to sell, or will they?
Is Coles another Qantas in the making with its iconic brand names in Australian retailing?
Somehow I don't think so.
The difference with Qantas is that the airline's business was sound, and doing a lot better than management was willing to say. That's why the shares have risen since the bid failed, up to yesterday.
Coles' situation is quite likely worse than management have let on, especially its prospects next year when earnings are expected to fall.
As written yesterday, TPG remains in the most interesting position because of its experience in retailing overseas and here, thanks to its purchase of Myer.
But Myer has to be kept separate to Coles: it's the one reason why it has recovered market position. The Coles culture was strangling the department store retailer (not to mention management with no clues about retailing).
Coles has called for final bids in the week starting June 25, with Wesfarmers currently doing due diligence. Will it take fright?
The KKR-led group first offer was $14.50 a Coles share for the retailer in September, and then sweetened the offer to $15.25. Coles rejected both for being too low.
Both probably still are, but how would we know?
