Coles considers part sales

Coles may be considering selling off its assets separately, after a number of private equity investors pulled out of buying the entire business. Coles could even retain its supermarkets division but sell off more sought-after divisions such as Target and Officeworks. Woolworth's and Harvey Norman have expressed interest in Officeworks division and are likely begin talks right away.

However, some speculate that since a partial sale would be more time-consuming and add to uncertainty about the company's future, the move may be designed to extract a higher bid from Wesfarmers for the entire business by threatening to hand off the best parts of the company to other buyers.

It is uncertain how a break-up proposal will affect Wesfarmers, which is bidding for the entire company in league with private-equity players Permira and Pacific Equity Partners, as well as Macquarie Bank. Although Coles may be able to achieve higher prices for some divisions by selling them off individually, it is unlikely Wesfarmers would want to buy the underperforming supermarkets division.

The remaining interested consortium members TPG, Carlyle and Blackstone are unlikely to proceed with a bid unless they joined forces with Woolworths, which had the ability to offer its own shares as partial consideration for Coles.

So far, Woolworths has been unable to conduct due-diligence scrutiny of Officeworks and Target, amid a dispute over whether Coles would provide information on its Kmart operation as well. It is understood Woolworths wants to buy a number of Coles's 165 stores in order to boost its competing Big W general merchandise division, a move Coles has resisted.

(Source: The Australian)