Woolworths has its foot on the neck of a bleeding Coles Group and controls the fate of its fading rival.
So desperate has the Coles board become to establish some price tension in any takeover battle, that it had let its arch rival into the due diligence data room for Target/Officeworks and will provide some general background information on Kmart to Woolies.
And, so desperate has Coles become to get an auction going, that it agreed to paying the due diligence costs of the TPG-led buyout group from the US, to a maximum of $10 million,
Or rather, the desperates on the Coles board acceded to a demand from the TPG group, with the unstatedhint that the group may not end up making a bid for the retailer. The current company won't pay for this lurk: the winner of the takeover bid will.
It is another small but noticeable insult from the board to Coles shareholders.
After all it's the board and management of the retailer who have put Coles into the present difficult situation with the inept stewardship of the group, especially the failed revamp plan of last year.
So we have the indignity of a weakening retail giant at the mercy of its major rival not top mention a trio of private equity investors who have spotted a weak point and are determined to exploit it.
After it looks at what it wants in the data room, Woolies will then decide if it joins with theTPG-led buyout group, or approaches Wesfarmers and its group and tries to do a deal.
They will get short shrift from Wesfarmers simply because it doesn't want to give its potential rival any breaks.
The TPG group may not be amenable either because reviving Coles is going to be tough enough, without handling more advantages to Woolies.
TPG and its partners might not stay around, but if they do they will still need shares in Woolies to use to offer Coles shareholders the option of rolling over their capital gains into WOW shares.
There is nothing in it for Woolies in linking to the TPG group that it wouldn't be able to get by direct negotiation in the present circumstances.
The Coles board and shareholders will have no control whatsoever, except to try and make sure Woolies doesn't get any extra market information to use against Coles in any negotiation.
The whole situation should not be allowed to happen anyway and the ACCC should knock it on the head, but it won't because it's timid, Melbourne-based (as is Coles) and its ability to be interventionist in these matters was long taken away or watered down by this government.
The big problem for Coles and its shareholders, is that there is still only one stated buyer: Wesfarmers and its group of Macquarie Bank, Pacific Equity and Permira.
Their first offer at $16.47 is the only price on the table and the $17.25 try on with big Coles shareholders six weeks ago was just that, from what it would seem. No shares changed hands and there is increasingly no reason to expect an offer at this price.
Woolies, TPG and Wesfarmers won't want to pay over the odds because there is no reason to.
Coles' businesses are not in good health and there is no outstanding reason to buy them, except as a recovery situation: and the key to making that work will be to pay as little as possible because so much work is going to be needed to make the turnaround a success.
Finally some commentators have said that with the knock back for The Warehouse Group in NZ, Woolies will now concentrate on Coles.
Well it won't simply because the process in NZ is not over yet and the Commerce Commission has yet to publish its full reasons.
Losing in NZ will not encourage Woolies to pay any more than it already wants to for Coles assets.
Woolies hasn't got to be where it is now in Australian retailing by being foolish or doing silly things. Discipline has been a hallmark of the retailer and its management and strategy.
Many hundreds of thousands of Australian investors wish the same could be said about the Coles board and management.
