Coles Spinoff Plan May Put Australian Supermarket Giant in Play

(Bloomberg) -- Wesfarmers Ltd.’s plan to spin off its Coles supermarkets, liquor and convenience stores could put the Australian retailing giant in play.

The business, which generated A$39.2 billion ($30.5 billion) in sales from 2,500 stores in fiscal 2017, could be attractive to a buyer looking to make a big splash Down Under, Citigroup Inc.’s Sydney-based credit specialist Anthony Ip said.

“We wouldn’t rule out an alternative proposal/bid for Coles from an industry player looking to gain instant scale to the Australian supermarket sector,” Ip said.

Coles Spinoff Plan May Put Australian Supermarket Giant in Play

Asked if Wesfarmers would consider a bid for the business, Chief Executive Officer Rob Scott said, “Every one of our businesses is for sale all of the time, subject to someone putting a very compelling offer to us with a high degree of comfort around completion.”

“We would welcome any offers but it would need to be at a very attractive value for our shareholders in order for us to consider it,” Scott said Friday on a media call.

Any potential buyer would need deep pockets. Coles’s food, liquor and convenience stores are valued at about A$21 billion, according to Credit Suisse Group AG analysts. Also, the division’s first-half operating profit fell 14 percent after a bruising price war with rival Woolworths Group Ltd. Add to that the recent arrival of Amazon.com Inc. in Australia and discount chain Aldi’s rapid growth, and a dash of courage would help as well.

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