Financial buyers place multi-billion dollar Aussie bets

KKR and CVC make headway on large transactions in AustraliaÆs retail and media sectors.
Foreign private equity firms are playing for high stakes in AustraliaÆs M&A market with Kohlberg Kravis Roberts and CVC Asia Pacific making moves on two significant transactions this week.

KKR, as the head of a consortium of five other firms, received another set back in its hostile bid for retailer Coles Myer on Thursday when the board rejected a revised offer of A$15.25 a share. The new bid made late on Wednesday was 11% higher than the consortiumÆs offer of A$14.50 a share made in August. The new offer values the business at A$18.2 billion.

Despite KKRÆs warning that the new bid would be its final offer, Coles MyerÆs board acting quickly to reject the revised proposal, saying the offer was too conditional and gave ôno certainty that the price proposed would be delivered to shareholdersö.

ôWe believe that shareholder interests will be better served by the company pursuing its own growth strategy,ö board chairman Rick Allert said on Thursday morning.

Investors punished AllertÆs hasty move by dumping shares. Coles Myer stock dropped nearly 9% in trading on Thursday to close at A$13.18. At this price, analysts say the KKR consortium offer represents a premium of 15.7%. ôMaybe Allert should have consulted shareholders before he dismissed the new offer,ö says one retail analyst.

Coles Myer has said it will make a formal decision once it has met with advisors Carnegie Wylie and Deutsche Bank. KKR has given the company until next Monday to support the deal otherwise it will withdraw the bid. The other firms involved in the Coles Myer bid include Carlyle Group, CVC Asia Pacific, Texas Pacific Group (TPG) and Blackstone Group. In June this year, TPG-Newbridge was involved in another transaction with Coles Myer, buying its Myer department stores division for A$1.4 billion.

Meanwhile, investors in media company Publishing and Broadcasting Limited (PBL) spent Thursday digesting news that owner James Packer had struck a deal to hive off its television and magazine interests into a new company and sell 50% of the entity to CVC Asia Pacific for A$4.5 billion.

The deal was struck on Wednesday, the same day that the Australian parliament approved new media ownership laws which allow for greater foreign participation and cross-ownership of different mediums. On Thursday, analysts were saying PBL was likely to use the cash injection to increase its interests in international gaming, such as casinos in Asia. This would mark a bold new direction from the company since patriarch Kerry Packer died last December, leaving his son James in charge. Others say Packer may be storing cash in order to make a bid for another media company Fairfax Holdings.

PBL shares fell by 64 cents on Thursday to A$19.95 contributing to a 27.9% decline in the ASX/S&P200 index. Ratings agency Fitch meanwhile put PBLÆs rating on Credit Watch Negative.

CVC will initially invest in the joint venture with PBL using a convertible bond that wonÆt convert into equity until after the new media ownership rules become law sometime next year.
¬ Haymarket Media Limited. All rights reserved.
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