Australia | Sep 07 2006
By Rudi Filapek-Vandyck
The price of Coles (CML) shares is expected to come under pressure this morning as investors are likely to vote with their feet against the board’s decision to reject a formal takeover offer that would pay shareholders $14.40 for each of their shares.
However, market sources also say that any share price weakness is likely not to last for very long and the shares are expected to bounce back rather quickly if the fall is too severe. This because the company is expected to remain “in play” with more approaches and offers expected to follow.
As one source put it: “they [the private equity players] are not just going to walk away. The flag has been raised, Coles is in play. What might happen is that possible suitors will have to wait for a better moment, or they will have to come up with a better idea. One thing is certain: this story ain’t over and anything is possible from now on, including a very long battle between the board and the company’s suitors. It should be clear that lawyers, corporate advisers and investment bankers throughout the country are rubbing their hands as this is going to be a feast [for them]. And so will Coles’ competitors.”
Some brokers in the market are drawing parallels with what happened with the Pacifica (PBB) share price after the company rejected a takeover proposal: the shares dived. The fact that the company issued a profit warning after that didn’t really help either.