Yesterday the Coles Group Ltd price fell below the $16.47 indicative offer from Wesfarmers and has stayed down this morning. The market now seems certain that neither Wesfarmers, nor any other bidder, will offer more than $16.47. We are now seeing the possibility of a lower priced Wesfarmers bid being factored in to the CGJ share price.

Given that several of the potential suitors have walked away after due diligence, we can only assume that they are finding some bizarre things at Tooronga. Certainly nothing to encourage a bid around the $19 mooted during the early stages of this process.

The ACCC has announced that it’s investigating the proposed takeover by Wesfarmers and the possible consequences of the overlap of Wesfarmers’ Kleenheat business with Coles Express. Both sell LPG.

The ACCC investigation is unlikely to result in any significant obstacles being placed in the path of a Coles-Wesfarmers merger. The regulator’s attitude to Woolworths’ involvement is the much larger issue.

There remains the possibility that Wesfarmers could also walk. No-one is discussing that outcome.

If that were to happen, and a bid from Woolworths for only part of the company was the only thing left on the table, the Coles share price would likely go into free fall. We have seen Coles’s plan B, involving generating some bid tension by allowing Woolworths into the process.

I wonder if they have a Plan C.

Disclosure: My company Orex recruits managers for Bunnings and my wife still hasn’t sold her Coles shares.

Rob Lake publishes Brandish – Retail Intelligence, a fortnightly newsletter and website.

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