Coles Rejects Bid

Coles has an outperform recommendation from Macquarie Research Equities (MRE). The stock analyst believes that the stock has a price floor of around $13.10. Coles (CML) have rejected a revised indicative bid of $15.25 from the KKR syndicate. The syndicate have communicated that this would be the final proposal, and that it will not increase the indicative bid and will withdraw the proposal by 9am on October 23 if the bid does not have board support. It is interesting to see the bid that high - which could be seen as a validation of the forecasts that Coles (CML) have been making. According to MRE: "Turning around retail is fairly simple in concept. There are three levers: 1) reduce costs, 2) increase margins and, 3) increase like for like (comp) sales growth." And from plan to action, MRE suggests CML to do the following:

At the micro level, more common initiatives include: improvement inventory management by cutting suppliers, increase volume discounts and improve margins. Supply chain optimisation is being achieved through category management and automated store replenishment. So if KKR could do it, why shouldn't Coles do it? Answer, the market isn't sure about management! The board obviously believes management and in doing so is taking on significant reputational risk. This again should not be ignored by investors. The board includes well credentialed retailers and successful business people. They have the business plans and boards papers…. so they are better informed than KKR which placed a value of $15.25 on the share without due diligence. So its up to Mr Fletcher and his team who now find themselves to some extent custodians of the companies and board members board reputations!

Coles Myer Limited is listed on the Australian Stock Exchange (ASX) under stock code CML. You can view their investor website here. Coles Myer is primarily a retailer and was listed on the ASX on 24 September, 1929. Browse for other broker recommendations. Check your charts and good luck with your share trading!