U.S. News

KKR Starts Due Diligence on Australia's Coles


The auction process for Australia's second largest retailer, Coles Group , has kicked into gear, with a private-equity consortium led by Kohlberg Kravis Roberts the first group to start due diligence.

Coles' data rooms have been ready for almost a month, but wrangling over confidentiality agreements has delayed the entry of KKR and rival bidder conglomerate Wesfarmers, which has offered A$19.7 billion (US$16.4 billion) for Coles.

A source close to the situation told Reuters on Saturday the KKR consortium began due diligence late on Friday, and added the group has gained exclusive access for two weeks.

The two-week deal is seen as an attempt by Coles to level the playing field with Wesfarmers, which is considered to have the advantage after taking control of 12.8% of the retailer.

The KKR consortium includes Bain, CVC, Blackstone Group, Carlyle Group and TPG, and it has told Coles management it is confident it can match or beat the Wesfarmers offer.

The start of the due diligence process is positive news for Coles ahead of its third-quarter sales results due on Thursday, which are expected to show continued lackluster performance and loss of market share in the core business. 

Coles put itself up for sale in February after downgrading its profit forecasts.

KKR will be conducting due diligence on all of Coles' businesses: the core supermarkets and liquor business, the Officeworks business supplies chain, and discount clothing chain Target.

KKR has also been considering a joint bid with Australia's largest retailer Woolworths, which is interested in Officeworks and Target.  Woolworths has said it is talking with several parties. Last week, Tesco pulled out of the competition.