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Bain Pulls Out of Group Bidding for Coles

Private equity firm Bain has pulled out of a consortium looking at buying Australia's Coles Group, a source said on Thursday, raising questions about the financial firepower of the remaining three members of the group.

The state of the private-equity consortium has been in flux since its lead member, Kohlberg Kravis Roberts, and CVC abandoned pursuit of the retailer earlier this week, boosting the chances of success of a rival A$19.7 billion bid by conglomerate Wesfarmers.

Coles' advisers have been told Bain was withdrawing, a source familiar with the matter told Reuters.

The source said there was no official word about the position of Blackstone Group, following speculation it too was pulling out. But a second source close to the talks said it was expected that Blackstone would withdraw.

The group has shrunk from six members to three, and analysts have raised questions about whether the remaining private equity firms would want to commit the much larger equity contribution required by each member for a bid.

The other remaining partners in the consortium are Texas Pacific Group and Carlyle Group.

The consortium has been considering a possible link-up with Australia's largest supermarkets chain Woolworths, which is interested in some of Coles' businesses but would not be able to touch its core supermarket or liquor business due to competition concerns.

"There is a still long way to go in the process, and plenty of options can still play out," the first source said. Much depends on whether Woolworths decides to partner up in a joint bid, or bid by itself for the assets it is interested in.

Coles has said it will consider separate bids for its core business including discount chain Kmart; the Officeworks business supplies chain; and discount clothing retailer Target. Coles has asked for final bids for the company from June 25.

Wesfarmers offered A$16.47 a share, or A$19.7 billion, for all of Coles in early April but only began scrutinizing the retailer's books on May 25.

Coles has said it wants to run a competitive bidding process, but the potential loss of the rival bidding group has hammered its share price in recent days.