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.

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 Inc. in Australia and discount chain Aldi’s rapid growth, and a dash of courage would help as well.

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