KKR and CVC quit the race for Coles

Over the weekend, two firms involved in the bidding process for Australian retailer Coles Group have departed from the process: CVC Asia Pacific and Kohlberg Kravis Roberts (KKR). Yesterday Australian media reported that it was unclear whether the remaining partners would continue with an offer.

The KKR and CVC Asia Pacific departures are understood to result from an analysis of the retailer's books, which show a marked deterioration. KKR allegedly had concerns that Coles was over-valued. Lacking signs of Coles improving its food, liquor and grocery business, a price of AU$20bn (US$15.83bn) for the retailer is seen as an excessive price to pay.

According to the Australian Financial Review (AFR), the decision by US private equity firm Kohlberg Kravis Roberts to abandon the Coles Group auction should reassure Australians. Coinciding with the failure of takeover bids for Qantas, APN News & Media, Orica and Flight Centre, it proves the market is working says AFR. Shareholders are comparing the price offered against growth prospects, and boards are reminded to work harder to achieve the same gains as private equity.