Wesfarmers has made a bid for Coles on its own after the turmoil in debt markets saw the European buyout group, Permira withdraw, taking with it the local equity group, Pacific Equity Partners.
Wesfarmers lodged a bid on its own on the weekend, while bids were reportedly received from Woolworths for some of the chain's businesses (Target, Officeworks) and the TPG group, for the supermarkets, liquor and petrol business.
But Wesfarmers lodged the only complete offer for all of Coles: at a value of $20 billion, according to reports today.
Wesfarmers consortium's collapse was only made known to the Coles board on Saturday. It was caused by the same factors that blew up the TPG Group: the increased volatility in debt markets caused by the failure of three big hedge funds last week and the contraction in credit,.
The departure of the two private equity groups, Permira and Pacific Equity Partners (PEP), means their plans to take 30 per cent of Coles' supermarkets, liquor, fuel and discount department store division have been dumped.
Macquarie Bank dropped out because the structure had changed, but Macquarie Bank is in the private equity business and would have faced the same problems as PEP and Permira in financing its 15 per cent share of the offer.
Wesfarmers is believed to have lodged a bid, including an equity component which was more than half the $20 billion of the offer, as the company sought to exploit the sharp rise in the value of its shares to more than $45 each last week.
But WES will still have to find billions and billions of dollars in cash, $8 billion by some estimates this morning.
That may require WES to sell some of its business: the coal and insurance operations would be the most readily saleable.
Market observers claim Wesfarmers probably offered about $16.47 a share, the price that the company paid for its 12.8 per cent stake on April.
The Coles board met yesterday, now faces the choice between a straight-forward bid for the whole company or a messy break-up which will be costly and time consuming.
Wesfarmers is understood to have reserved the right to go hostile if the Coles board recommends a break-up.
A decision by the board is expected quickly but the Coles board, but itsham-fisted handling of the sale process, has placed the company close to being where it could have missed out on anoffer for all the company.
Coles' management can't sell the company piecemeal because it would need shareholder approval and with 12.8 per cent of the retailer's issued shares, Wesfarmers would block any deal at a meeting of shareholders.WES shares reached $45.73 on Friday and even if you take an average over the past month, you still get a price of around $40. WES management will stress the $45, Coles will stress the lower average valuation for what reason we will not be able to fathom.
But investors will sell off WES shares on the news of the go-it-alone offer and the size of the cash component. So we can expect the shares in WES and Coles to be suspended while the fate of the bid is sorted out.
Issuing $12 billion in shares and looking for $8 billion in cash is going to be a daunting ask, especially with debt markets nervy, as we have seen in the case of WES's partners and the rival buyout group.
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Kerry Stokes' Seven Network Group has sent a message to Transfield Services that its bid is too cheap and it won't get its hands on Perth-based GRD.
The Seven Network late Friday revealed that it had boosted its stake in GRD from 10.39 per cent, to 12.5 per cent with the purchase of another 3.5 million shares.
That took Seven's holding to 23.5 million shares.
As the purchases were above the $270-$2.75 price range suggested by Transfield as a price for a bid, the message is clear.
Think again!
GRD shares closed at $2.82 on Friday.
Seven picked up its 20 million share holding seven weeks ago after the chairman of GRD stepped down and wanted to sell some of his holding.
Stokes, being a Perth businessman, and GRD being Perth-based with board members friendly with the Seven proprietor, paid $2.35 a share or $47 million for his original stake.
At the suggested offer price the Stokes holding would be worth up to $64.6 million, after the buying last week. The average entry price is around $2.42.
To understand the Seven holding, you have to take into account the personal links between Stokes and GRD chairman, Richard Court, the former Liberal Premier of WA.
GRD said it last Thursday had received an incomplete offer for the company from Transfield that values it at up to $529 million.
GRD said the offer from Transfield Services contains an indicative purchase price of $2.70 to $2.75 per share, with the final price to be set following due diligence.
"The proposal is incomplete and the conditions include GRD Ltd allowing Transfield Services Limited to undertake due diligence," GRD said in a statement to the ASX.
"Transfield Services Ltd has not been granted access to GRD Ltd's records to commence the due diligence process."
GRD said its directors are considering the proposal and will respond soon.
