Shares in Australian conglomerate Wesfarmers and in Coles Group fell on Tuesday as trading resumed following Wesfarmers' A$20 billion (US$17 billion) takeover of Coles to create the country's biggest retailer.
Wesfarmers shares slipped as much as 6.6% to A$42.71, valuing Coles at A$16.42 a share. But Coles shares fell 3.4% to A$15.57, well below Wesfarmers' valuation, which suggested that traders do not expect an increased bid or a rival bid to emerge.
Some analysts raised concerns of execution risk in turning around Coles.
"I think there is a little bit of trepidation that running a supermarket successfully is an extremely hard task, and are they up to it," said James Holt, a portfolio manager with Zurich Financial Services, which oversees about A$8 billion including Coles shares. "They (Wesfarmers) have done well before, but they have never tackled anything as big or as complicated as Coles," he added.
About 75% of the acquisition is to be funded by Wesfarmer's shares, and any fall in its share price would lower the value of the bid for Coles' shareholders.
"We think the increased use of Wesfarmers scrip after the recent rally is opportunistic," JP Morgan said in a report.
Wesfarmers shares have climbed 24% since April, when it first declared its intention to buy Coles, to the close of trading on Friday. Shares in the two were suspended on Monday.
On Monday, Wesfarmers agreed to pay 0.2843 of its own share, A$4.00 in cash and A$0.25 dividend from Coles to acquire Coles, which is now Australia's second-biggest retailer.
The deal, if approved by shareholders, will end a protracted process since Coles first put itself up for sale in February after struggling with falling sales. Last year, it rejected two offers from private equity firm Kohlberg Kravis Roberts.