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Goodbye Coles. Bonjour Carrefour?

By Jonathan J. Ariel - posted Monday, 30 April 2007

Carrefour means crossroads in French, and that is exactly where KKR, the 800kg private equity gorilla is currently situated, as it valiantly tries to shape an attractive offer that will entice the shareholders of Coles Group. An offer that will trump the one made by Wesfarmers.

As luck would have it, Carrefour is also the name of the world’s second largest retailer.

Wesfarmers, sporting the green ‘n’ gold and currently the front runner in the bidding for Coles Group, two weeks ago took off its gloves in the war for the hearts and script of Coles Group shareholders.


Wesfarmers’ advertising had a lot of things going for it. It was proactive. It sought to placate anxious Coles shareholders. And it appealed to nationalism.

In its advertisement of April 11, Wesfarmers mentioned “Australia” or “Australian” no less than five times. The company trumpeted its “Australian heritage”, its “Australian businesses” and its “Australian” experience. The only things lacking in the advertisements were pictures of lamingtons, freshly baked Anzac biscuits, crates of Victoria Bitter and rows and rows of the Southern Cross. But I expect these will all feature in subsequent ad campaigns, as Wesfarmers talks up its Australian-ness while obfuscating details of its plans to revitalise Coles.

The real battle for Coles has not even begun.

In their advertisements Wesfarmers admit they are to seek information from Coles before they can move the offer forward. But Wesfarmers has fired the first salvo in another battle. The battle for public opinion. Wesfarmers knows that a good story must have certain elements such as a theme, a hero, and a beginning, middle and end, to make it compelling. The theme is a “better” Coles; the hero is a “proud” Australian firm (Wesfarmers) and the beginning is to talk up its dinki-di-ness. The “end” is victory for Wesfarmers. The middle, well, that's yet to be authored.

So far, good storytelling.

In the blue corner, KKR is well aware that it can’t win a fight with Wesfarmers on the battlefield of nationalism. But victory is assured if it offers a better deal to Coles’ shareholders.


To find favour with shareholders: KKR’s offer must beat the nominal prices offered by rival bidders; and  KKR must neutralise any CGT benefit that Wesfarmers is offering. For instance, KKR can sweeten the pot by promising existing Coles shareholders that they’ll be able to swap their Coles shares for cash and shares in a KKR/Carrefour retail operation. KKR could legitimately trumpet a new dawn in Australian retailing by bringing the cheese eating multinational, Carrefour, to our shores.

With an alliance in place with Carrefour, KKR could honestly say that it is redressing the abysmal state of Australian retailing, by bringing over world class operators. More importantly, KKR could list the new corporation on the ASX. The dismal state of our local supermarkets is a direct result of zero innovation from the two horses that constitute the race in Australian retailing. Any visit to a Carrefour hypermarket in Asia or Europe will blow the socks off anyone used to the stale customer service and pedestrian product range that is typical at Coles, Woolworths, K-Mart or Big W.

So what is Carrefour like as a retailer?

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About the Author

Jonathan J. Ariel is an economist and financial analyst. He holds a MBA from the Australian Graduate School of Management. He can be contacted at

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