Today’s reports in the Fairfax and News media that TPG is abandoning its bid have been addressed in a two line release by Coles saying that they haven’t been told and that TPG had confirmed meetings arranged for today. Not quite a categorical denial, but pretty close.
The market seems to believe the TPG tilt is over, trading CGJ down to 7c below the Wesfarmers indicative $16.47 offer, down from an overnight $16.90. By noon CGJ had recovered to $16.51 and WES continued its recent climb to $44.56, having almost hit a record high of $44.99 during the morning.
With only eight sleeps before the bid deadline, the non-appearance of Harvey Norman, Tesco, Wal-Mart would indicate that we can be sure they will not be players.
If TPG were to withdraw, it would almost certainly mean that Wesfarmers will prevail, and is the best outcome for shareholders, suppliers, customers, staff and pretty much everyone who has anything to do with Coles.
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As the only bidder wiling to buy the whole show, Wesfarmers is now the clear front-runner, with daylight second. The slim possibility of Woolworths acquiring Officeworks and parts of the Target and Kmart discount department store businesses seems to be slipping in the face of the Wesfarmers’ momentum and doubts about competition concerns.
The holders of Coles shares may be seen as losing in the short term. If placed back in the market, the $16 that Coles could have almost certainly extracted from KKR last spring would now be worth around $19. Coles would have avoided the disastrous attempted conversion of Bi-Lo stores and the embarrassment of further flawed decision making, failed strategies and stumbling performance.
The big losers are the leaders at Fort Fumble. This sorry saga leaves some reputations in tatters. No amount of spin about lifting shareholder value will hide the fact that they did not do well enough.
In the longer term, the Coles shareholders who accept Wesfarmers stock will reap the benefits of better management.
Hubris, bullying, and politics will give way to measured risk-taking, a happy and motivated team and the permanent understanding that the best results will only be achieved by assuming that they will never get it right. Wesfarmers-led Bunnings is far from perfect, but one of the perfect things about them is that they know they are flawed and need to constantly challenge the status quo.
Suppliers will partner the retailer instead of the adversarial relationship many have endured.
For the Coles team members, at all levels, the focus will be on the future. They will have a vivid understanding of what is to be achieved and the role they can play. Performance will be driven in a new way by building trust, developing people and inspiring action.
Coles, Kmart, Target, Officeworks and the grog and petrol businesses will start to get a bit of the Bunnings feeling about them. And you don’t need to know much about retail to understand that to be a good result.
DISCLOSURE: Anyone who has been paying attention will know that my company Orex has recruited hundreds of managers for Bunnings and that my wife owns a few Coles shares.