Australia's Wesfarmers bids for Coles

Australian conglomerate Wesfarmers Ltd. on Monday offered 21.9 billion Australian dollars, or $18.6 billion, for retailer Coles Group Ltd. _ the largest takeover bid in Australian corporate history.

The Perth-based mining, insurance and industrial giant offered offered A$4.00 ($3.40) cash and 0.2843 Wesfarmers share for each Coles share, valuing the retail giant at A$17.25 ($14.66) per share, including a final dividend of 25 cents per unit.

Coles Chairman Rick Allert called the deal "a great outcome for Coles shareholders" and said the board unanimously recommended the offer.

"The recommendation from the Coles board is a big step towards helping end the uncertainty for shareholders, employees, suppliers and customers surrounding the company's ownership review," Wesfarmers Chief Executive Richard Goyder said in a statement.

Goyder said he expected the acquisition of Melbourne-based Coles to be complete by October.

If shareholders accept the deal, it will become the largest corporate takeover since the 2001 buyout of telecommunications company Optus by Singapore Telecommunications, or SingTel, for about A$14 billion.

The merged company would also rank among the top 10 companies on the Australian Stock Exchange by market capitalization, and would place Wesfarmers ahead of Woolworths Ltd. as the largest retailer in Australia.

Coles is currently the country's second-largest retailer. Its holdings include a nationwide chain of supermarkets and liquor stores, discount retailer Target Australia, stationery supplier Officeworks and Kmart Australia Ltd.

Coles put itself up for auction in February after slashing its profit forecast for the 2007-08 fiscal year by 10 percent due to slowing sales at its core supermarket operations.

Wesfarmers was left alone in the bidding process after its private equity partner, London-based Permira, pulled out over the weekend, just before the bid deadline. Another bid consortium led by U.S.-based Texas Pacific Group pulled out last week.

Coles' decision to put itself up for sale came five months after the board knocked back a A$15.25 per share offer from a consortium of six private equity firms led by New York-based Kohlberg Kravis Roberts & Co., which valued the company at A$18.2 billion. Coles had said the offer was too low.

Allert said Monday's offer from Wesfarmers marked a significant improvement over the KKR offer.

The Australian Stock Exchange froze trading of shares Monday in Coles and Wesfarmers pending the outcome of takeover talks. Coles shares last traded Friday at A$16.12 ($13.70); Wesfarmers shares closed at A$45.73 ($38.89).