An attempt by Wesfarmers to snatch a greater stake in Coles Group has failed and lifted the potential bid price closer to $18 a share.

Wesfarmers offered big shareholders $17.25 for their shares last night and was rebuffed. Today the market took the shares to a high of $17.79 and they settled back around $17.73, up 46c.

At this level Coles Group is valued at around $21 billion and at $18 a share, it would be well over that figure.

Wesfarmers seems to have tried to buy more shares to add to its 12.8 per cent stake to put pressure on Coles management who have been negotiating with other possible bidders including the KKR buyout group and possibly US retail giant, Tesco and Woolworths.

Wesfarmers is bidding $16.47 for Coles but that is clearly no longer relevant.

The presence of Tesco is not firm as it knows it will be attacked by the far tougher UK funds management industry if it finances a multi-billion dollar bid for Coles instead of spending that money on expanding in Asia, especially China.

Woolworths faces a dilemma: Tesco would be a formidable competitor in Australia and by scheming Woolies could be ruining its dream run here; that’s unless the link up with Tesco is a temporary deal just to get control of Officeworks and Target, with Tesco on-selling the other businesses.

Investors in Woolies would react adversely if the retailer did a deal that allowed Tesco into the Australian market. Woolies shares would be sold off. That’s why a link with Tesco looks a partnership of convenience rather than anything else.

Meanwhile, Airline Partners Australia had some good news to report today, its total stake in Qantas rose: by some 8.6 million shares to 25.94% from 25.51%.

The number of shares in the Institutional Acceptance facility fell sharply to 164.8 million from 256.8 million and the number of shares now actually covered by real acceptances rose by 101 million to 349.66 million from 248.4 million.

So the rise really was due to a reshuffle of holdings by some big holders and the flow of acceptances from smaller shareholders.

APA has to double its stake in the next three days to be in a position to have more than 50% of Qantas by 7pm Friday and give itself an extra two weeks to get to 70%.

Peter Fray

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Peter Fray
Editor-in-chief of Crikey