Crikey received an anonymous tip: “the word around Coles head office is that members of the Coles board and the Wesfarmers board plus Fletcher and Goyder are meeting in Melbourne to work out what happens next. Coles camp are ready to ditch the deal and Wesfarmers want to bat on”

There’s some truth in the rumour.

Heavies from Coles and Wesfarmers have been in recent contact as the market has pushed the share prices of WES and CGJ to the point where either can cancel their betrothal.

In a meeting this week with a senior Coles person, I was given the clear impression that the mood at Coles HQ remains positive, and that the leadership team seems convinced the WES deal will go through. My source said that the message is coming from the very top; this would be unlikely if Fletcher and the board were sending any other signals.

When rejecting the KKR offer, Coles told the world that the company was worth more than $17 a share. With the deal now appearing to values Coles at closer to $14, the company needs a face-saving sweetener, and Wesfarmers appears unwilling to offer anything more. It’s reporting season and we are about to get results from the two companies but it is difficult to see how even the most delightful numbers from each could drive the share prices far enough north.

Wesfamers remains eager to complete the sale, but maybe Coles is becoming less so. However, if the Coles board want to call the deal off, they had better have a very good alternative, because the other imaginable outcomes are too horrible to contemplate.

The sale of Coles to Wesfarmers will change the board and some of the (failed) senior management at Coles. Most of the shareholders will remain (with a different company name on their CHESS holding statement) and most of the staff will continue. Coles will be free to get on with fixing the business and many customers will return. Coles insiders tell me that the lack of clarity has destroyed morale and decision making. Many sections of the company have all but ground to a halt.

Woolworths remains interested in Officeworks & Target and Harvey Norman has eyes for Officeworks — but these deals involve Coles selling the cream, leaving the curds and whey – and perhaps it’s really only the whey. If the stronger businesses are sold, finding a buyer for supermarkets and Kmart would be challenging.

It’s time for everyone to take a breath and pause to consider whether this deal falling over might result in Coles, which is after all only a group of shops, going the way of other once dominant shops like Moran & Cato, Gowings or Foy & Gibson.

For example, Coles has developed plans for new super centres, combining Coles and Kmart stores. These one-stop shops focus on shoppers and would blur the boundaries between the two businesses. They would range vitamins, energy drinks and food supplements in the sporting goods department and confectionery in toys. They had developed an advanced plan and road map for a five year journey. It was put on hold with the explanation that they needed to leave something for the new owners to do.

This is the sort of woolly thinking that has been coming from the top at Coles. Call me old fashioned if you like, but if I’m selling a used car. I would expect to get a better price if I washed and polished it, rather than leaving it to the next owner.

Coles HQ in Tooronga is a bizarre place at times.