For a time, a short time, I was thinking the Coles board and senior management, so inept when it came to running a retail business, were about to show us how to sell a company.
But their recent actions have demonstrated that their competency in running a sale matches their skills in running a few shops.
It is now quite clear that Coles should have invited KKR into discussions last spring when $15.25 was on the table. They might have talked them up to around $16 and Coles shareholders could have spread that around the market and turned it into $18-19.
Did Coles suffer a bout of hubris because they hadn’t come up with the idea? Did they have a burning desire to be seen to be in control? Or, was it just a case of continued poor management?
In sending KKR away, Coles allowed itself to slip further behind Woolworths and delayed the recovery that will come from better management. Now, the Coles board has iced a long record of poor decision-making by allowing Woolworths into the bid process.
If the late entry by Woolworths can achieve anything — and there is considerable doubt surrounding what WOW might offer and whether the ACCC will allow an acquisition — it will be at the price of a considerable delay. With this attempt at building some competitiveness into the auction, Coles may edge the price for Target and Officeworks up, but depress the value of the rest of the business and do longer-term damage.
In trying to perpetuate the myth that they know how to achieve the best result for shareholders, Fletcher et al launched an ill-conceived and disastrous recovery strategy, perhaps hoping for a miracle that would avoid a harsh judgement by shareholders.
CGJ shareholders can now be certain that a price above $18 is unachievable. It is now quite possible that Wesfarmers will come back with an offer lower than their initial $16.47. The market has doubts, trading Coles down to $16.39 this morning. Fletcher and Allert will doubtless spin any price higher than $15.25 and those who have not been paying attention might believe them.
The best outcome is for Coles to sell to Wesfarmers – and do it soon. Get an outcome, get some certainty, begin repairing morale and get some of the Wesfarmers culture into the once-and-future-great retailer. Any further delay just prolongs the caring and thoughtful stewardship of Allert, Fletcher and the Fort Fumble Allstars.
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Disclosure: My company Orex recruits managers for Bunnings and my wife should have sold her 700+ Coles shares when they were north of $17.80.
Rob Lake publishes Brandish – Retail Intelligence, a fortnightly newsletter and website.