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Fri, Aug 18, 2006 - Page 10 News List

Australia's largest retailer targeted for a takeover bid


Australia's largest retailer Coles Myer Ltd said yesterday it had been approached by unnamed parties interested in taking over the AU$16.5 billion (US$12.37 billion) company.

Coles Myer refused to name the suitor, but market speculation focussed on US giant Wal-Mart, Britain's Tesco, Germany's Aldi or a private equity consortium.

The news sent Coles Myer shares soaring AU$1.40, or 12 percent, to a record AU$13.10 as investors sought a piece of potentially Australia's largest retail deal.

In a brief statement to the Australian Stock Exchange, Coles Myer said it "had been approached on behalf of parties wishing to hold discussions regarding the company's ownership."

"In line with its fiduciary duties, the board will consider any bona fide proposals which might be put to it by those parties," the statement read.

Coles Myer said that it would proceed with a restructure as it rebrands under the name Coles Group Ltd following the sale in June of the Myer department store chain to a private equity group for AU$1.4 billion.

The company has more than 2,600 stores throughout Australia and New Zealand, employing more than 190,000 people.

Under the restructure plan, its Bi-Lo and K-Mart brands will disappear as the group consolidates under the three brands of Coles, Officeworks and Target.

The company warned earlier this month that the restructure meant there would be a "pause" in profit growth next year.

Tony Pearce, from fund manager Legg Mason, said it was unlikely Coles Myer would welcome a takeover bid.

"I think they're probably as surprised as the rest of us that this has happened, and it seems to have come along very quickly," he told the Australian Broadcasting Corp.

"I'd suggest that they're not really happy about it because they're in the process of, you know, they've been working very hard to achieve all the cost savings and rationalization, so I would detect a note of annoyance in the timing of this," he said.

FW Holst retail analyst David Spry said the company's suitor needed to act quickly if it wanted to take over the existing business because it was about to be transformed.

"If anyone was going to bid for Coles they had to do it now before Coles starts going down the track of their new structure, particular if they don't agree with it," he said.

The unexpected announcement overshadowed Coles Myer's scheduled release of annual sales figures, which rose 5.7 percent to AU$34.41 billion in the 12 months to last month.

It also resulted in the Australian stock market surging 1.89 percent with the benchmark SP/ASX 200 jumping 94 points to close at the day's high of 5,055.9.

Earlier, Coles chief executive John Fletcher said the fourth quarter results were achieved in a tight retail environment in which the combination of record fuel prices and higher interest rates are weighing on consumer sentiment.

The group's food and liquor business continues to improve in both headline and comparative sales growth, achieving record annual sales growth, he said.

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