Australian conglomerate Wesfarmers may sweeten the terms of its A$20 billion (US$17.5 billion) bid for retailer Coles Group as it seeks to shore up shareholder support, the Australian
Financial Review said on Friday.
Wesfarmers could offer Coles' shareholders a choice of all cash or all scrip, the paper said, citing no sources.
Wesfarmers had initially offered 0.2843 of each of its own shares, A$4 in cash and a A$0.25 dividend from Coles, but a poor initial stock market reaction to the bid has forced it to sweeten the bid.
Hedge funds are likely to take cash for their shares, while the some 300,000 small retail shareholders could be tempted by an all-scrip option because of the tax relief it would offer, the paper said.
A fall in Wesfarmers' share price since the offer earlier this month has reduced the value of the bid for Coles' shareholders, since about 75% of the bid is being funded by Wesfarmers' shares.
If the Wesfarmers' share price remains 10% below its June 29 close for 20 consecutive days, a trigger point of A$41.16, and also underperforms the broader market, either firm can walk away. Wesfarmers closed Thursday at A$41.01.