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Reuters reports that Tesco has hired Merrill Lynch to advise it on a likely independent bid it plans to make to acquire Coles Group, Australia’s second largest retailer.

This news stands in contrast to recent published reports suggesting that Tesco might make a joint bid for Coles with Woolworths, Australia’s largest retailer; the thinking was that if they were successful, Woolworths would take non-competing properties and Tesco would take the food business.

At the same time, there is a bid already on the table from Westfarmers, an Australian conglomerate that operates that nation’s largest D-I-Y retail business. And, it is expected that a consortium led by private equity group Kohlberg Kravis Roberts (KKR) also will make a bid for Coles.

And, there had been rumors about Wal-Mart getting into the fray, though not much chatter about it in recent days.
KC's View:
We were having a conversation with a really smart person the other day about the Coles situation, and he noted that on the one hand, it was hard to imagine Tesco and Woolworths teaming up, since Woolworths would have little interest in having Tesco as a competitor down under. On the other hand, he said, if Woolworths had to choose between Tesco and Wal-Mart as a competitor, it probably would prefer to have Tesco.

We suspect that one of the advantages that Tesco would have is that it is not an American company. We get the sense that there is resistance in Australia to the notion of an American company like Wal-Mart or KKR taking control of an asset like Coles.