By Campbell Kwan
Coles has abandoned talks to acquire pet care business Greencross for about $3.9 billion after investors raised concerns the deal would have drained resources from its core supermarkets business.
The listed retailer said on Friday it had ended talks with Greencross’ private equity owner TPG Capital over what would have been Coles’ first major acquisition since chief executive Leah Weckert took the helm three years ago.
“Coles applies a disciplined approach to acquisitions, and as one of Australia’s leading retailers, regularly assesses strategic opportunities that may complement its existing business,” the company said in a statement to the ASX notifying that discussions with TPG had ceased.
The proposed acquisition was widely seen as a counter to Woolworths’ $586 million acquisition of a majority stake in Petstock in 2024.
The market gave a lukewarm response to Coles’ potential tie-up with Greencross when news of the negotiations went public this month.
Coles shares jumped more than 4 per cent to $23.52 on Friday following the announcement that talks were over.
Citi analyst Adrian Lemme said negative feedback from investors probably contributed at least partly to Coles’ decision to abandon the Greencross tie-up.
“We had several concerns with the acquisition that were shared by investors from our extensive conversations in recent days,” said Lemme.
“We’ve long argued in favour of capital management to capitalise on balance sheet strength. Perhaps Coles will pursue capital management in due course.”
Wilson Asset Management analyst Hailey Kim also welcomed Coles’ decision to walk away from the Greencross deal, noting that the market was not convinced it was the best use of shareholder capital.
“Coles has shown discipline by walking away. There are still meaningful opportunities to create value within the core supermarket business, where capital can be deployed with greater certainty and lower execution risk,” said Kim.
Sources briefed on the talks, who spoke on the condition of anonymity because the discussions were confidential, said earlier in July that Coles and TPG had been engaged in discussions for at least nine months and were weeks away from signing a deal estimated to be valued at about $3.9 billion before it fell through.
The supermarket giant can now focus on staving off tough competition in the sector, with Woolworths enjoying a resurgence under chief executive Amanda Bardwell after two years of underperformance, and as online operators such as Amazon plan to boost their grocery offering.
The collapse of the talks mark a setback for TPG Capital, which acquired Greencross in 2019 for about $1 billion and had been pursuing a possible public listing of that business on the ASX, but deferred the plan until later this year while it tried to reach a deal with Coles.
The pet care business, which owns the Petbarn and City Farmers retail chains as well as hundreds of vet clinics and specialist hospitals, has 3 million customers across its network.
TPG is now expected to restart a process to list Greencross on the ASX, sources said.
The decision to walk away from the Greencross acquisition comes a day after Coles said it would appeal a decision by the Australian Competition and Consumer Commission to block the acquisition of a new supermarket and liquor site in Kalgoorlie, Western Australia, warning the decision could have knock-on effects for future developments.
The consumer watchdog this month blocked Coles from acquiring the 2800-square-metre site – the first use of new powers designed to prevent acquisitions that it believes are likely to reduce market competition.
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