Coles chairman Rick Allert is sending the barbarians from the gate telling shareholders that the indicative bid “substantially undervalued” the business. Having agreed that the share price should be above $14.50, the pressure is now on Allert and CEO John Fletcher to deliver.

Allert also announced that more detail would be released with the results presentation on 21 September to “provide shareholders with clarity on the key drivers of growth emanating from the new strategic direction, as well as the financial outlook for 2007 and 2008”.

This is hardly surprising given the caning Fletcher’s 31 July strategy announcement received for its lack of detail. There were no targets and a shortage of anything really new or inspiring. An underwhelmed market thought CML shares were worth $10.60.

A team that didn’t want measurable five year goals has certainly got a target now. They must achieve a price above $14.50 – without the luxury of half a decade to get there.

Barbarians at the gate and Klingons on the starboard bow.

What is not clear is whether the Coles board believes the price will be achieved by Fletcher’s team lifting performance or by the barbarians returning with a more appealing offer.

Having failed when approaching the board and trying to do this nicely, the barbarians may mass outside the locked gate with reinforcements and a battering ram. It might yet get ugly at Battlestar Galactica.

Confusion abounds. On the ABC last night, Alan Kohler suggested the price would jump to $14.50 this morning. The Fin’s Chanticleer column said: “Absent any statement declaring the bid over, the Coles stock may rise in anticipation of a higher bid”. Their Street Talk column disagrees: “Some brokers were estimating yesterday Coles shares would fall to $12.50.

CML fell 33c on substantial volume in the first twenty minutes of trading this morning. At noon the price was $13.70.


Peter Fray

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