Coles ends sales negotiations with franchise group, lowers outlook

Coles On Friday, it announced that it would end negotiations to sell its business, saying the retail environment had deteriorated significantly since the start of the bidding process.

Coles’ announcement confirmed CNBC’s report late Thursday that Coles had no plans to sell its business to vitamin shop owners. Franchise group..

Coles also reduced its second-quarter outlook due to softening consumer spending amid high inflation over decades. Compared to previous forecasts of low single-digit declines compared to last year, sales are now expected to be in the high single digits.

Coles’ stock price fell more than 20% in response to the news, hitting a 52-week low.

The retailer’s decision to close the deal is due to a fall in stock prices and a decline in sales. Coles has faced months of pressure from activist investors and needs to pursue a sale and rock its business with a new slate on its board of directors.Earlier this year it refused Another company’s $ 64 per share acquisition offer, Was considered too low. Shares were trading below $ 30 on Friday morning.

Coles said on Friday that after engaging with more than 25 different parties with the help of Goldman Sachs bankers, the harsh conditions of the retail industry and the economy as a whole have virtually ruined transactions with franchise groups.

In another 8-K filing to the Securities and Exchange Commission, Coles quoted recent disappointing financial reports from major retailers, including: Walmart “There was growing concern about trends in the retail and consumer industries, and then retailers’ stock prices fell sharply,” he said.

“Despite the coordinated efforts of both sides, the current funding and retail environment will reach an acceptable and fully viable agreement,” said Peter Bonnepartt, chair of the Coles Board of Directors, in a news release. Created a serious obstacle to the. “

“Given the volatility of the environment and the market, the board has decided that it is simply unwise to continue trading,” Bournepartt added.

Coles’ board decided that it was in the best interests of shareholders for management to continue to operate independently, but retailers said on Friday that the board “still accepts the opportunity to maximize shareholder value. There is. “

The franchise group also confirmed that negotiations to buy Coles were closed on Friday morning. The company, run by CEO Brian Kahn, said it would continue to value other internal and external trading opportunities.

Financing headache

As the Federal Reserve raised interest rates to counter rising inflation, stock market volatility and economic expansion made it more difficult to lend to such large-scale transactions. Walgreens Boots Alliance Earlier this week, he said he had abandoned plans to sell boots, a British pharmacy chain, and said the turmoil in global financial markets prevented third parties from making appropriate proposals.

According to the SEC filing, potential suitors from Coles, who did not bid in the end, showed interest in retailers’ real estate. However, one party said investing in traditional retail was “difficult.” Another said private transactions require insights not found in the public market.

The franchise group was considering reducing the bid As Coles approaches $ 60 per share from about $ 60, CNBC reported last week citing someone familiar with the matter. He said a shift in thinking took place as the retail industry’s outlook became more and more harsh amid growing concerns about the recession.

Franchise group in early June Proposed a $ 60 bid per share to buy Coles At a valuation of about $ 8 billion. The two companies then entered a three-week monopoly period during which they were able to consolidate due diligence and final funding arrangements. It ran that course last weekend.

Coles confirmed on Friday that the franchise group had submitted a revised proposal at $ 53 per share, albeit “without a clear funding arrangement to close the deal.” The parties subsequently faced “significant obstacles” in reaching a fully viable agreement, Coles said.

However, Coles said it would continue to value the opportunity to monetize part of its real estate portfolio. CNBC previously reported that the franchise group plans to fund the acquisition of Coles by selling some of the retailer’s real estate to another party and leasing it back.

Coles shares closed at $ 35.69 on Thursday. At some point during the day, stocks hit a 52-week low of $ 34.33. Coles concludes the day with a market capitalization of about $ 4.6 billion, and this year’s share price has fallen by about 28% so far.

Activist pressure

Activist Macellum Advisors has asked Coles to consider selling or considering other strategic alternatives. From January..Macerum Coles also insisted on renewing the board’s slate.Under CEO Michel Gas, retailers claim that their performance has been sluggish in recent years compared to their peers.

Macellum did not immediately respond to the request for comment.

However, Cole’s shareholders in mid-May Voted to re-election the slate of the company’s current 13 directorsThereby defeating Macerum’s proposal.

Over the last few weeks, the retail industry’s outlook has been harsh: Consumers pull back spending In certain discretionary categories such as household goods and apparel amid the threat of inflation and slowdown.

Luxury furniture chain RH on wednesday Reduced sales forecast for 2022We expect consumer demand for that product to soften later this year. Bed bath & beyond Sales plummeted in the last quarter Exile CEO..

In addition, due to supply chain failures, products arrive later than expected, resulting in a heap of inventories.Large retail store Target Early June Investor warned Its profits will be hit in the short term as it marks down unwanted items, cancels orders and takes proactive steps to remove excess inventory.

Coles Sales for 3 months until April 30 It decreased from $ 3.89 billion in 2021 to $ 3.72 billion. When reporting these figures in mid-May, retailers also significantly reduced their full-year profit and revenue forecasts, further disrupting potential trading conditions.

Coles ends sales negotiations with franchise group, lowers outlook

Source link Coles ends sales negotiations with franchise group, lowers outlook

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