ASX queries Wesfarmers' bid for Coles

The Australian Securities Exchange (ASX) issued a `please explain' after it noticed shares in the Perth-based conglomerate had surged close to 14 per cent since last week.

As well, the ASX noted, shares took off around the same time reports began appearing saying Wesfarmers was planning to lift the scrip component of its initial offer from 25 per cent to 40 per cent.

Amid heavy trading, the conglomerate's share price rose from $38.71 on June 12 to an intraday high of $44.00.

Two weeks ago, Wesfarmers' bid caught the interest of the Australian Competition and Consumer Commission (ACCC), which announced an informal review.

The competition regulator said there could be overlap in some product categories - including garden products, tools, lighting and electrical products - sold by the Coles and Wesfarmers' Bunnings stores.

Wesfarmers issued a statement to the ASX saying it had fulfilled its obligations to disclose all information which could have a material affect on its share price.

The Perth-based conglomerate said it had already indicated its scrip offering could go beyond 25 per cent more than a month ago in an investors' briefing that was conveyed to the stock exchange.

At the time finance director Gene Tilbrook said the company was "looking at ways to make it (the scrip component) a bit higher".

Wesfarmers heads a consortium comprised of investment banker Macquarie Bank Ltd and private equity players Pacific Equity Partners and Permira Holdings Ltd.

Wesfarmers, which owns two coal mines and has interest in a third one, said some analysts had upgraded their recommendations for its shares based on their increased coal price assumptions for 2008.

As well, there were indications that institutional investors were reweighting their portfolios to Wesfarmers on the basis that the conglomerate may acquire Coles, the company said.

Wesfarmers insisted it was in compliance with the stock exchange listing rule that it disclose all information that would have a material effect on its share price.

In April Wesfarmers made a $19.7 billion indicative offer for Coles at $16.47 a share, although it is now expected a successful takeover would push that figure past $20 billion.

Until this month, its rival was a private equity consortium that now includes buy-out specialists TPG (formerly known as Texas Pacific Group), Blackstone Group, and Carlyle Group.

But retail giant Woolworths Ltd recently joined the auction after signing a confidentiality agreement to undertake due diligence on its Coles books.

And in a further twist, the TPG-led group, while pursuing its own bid, is also continuing talks with Woolworths for a combined offer.

Woolworths is believed to be interested only in Coles's general merchandise businesses - Kmart, Target and Officeworks.

Coles has said it will accept bids from June 25.

Wesfarmers shares closed $1.11 cents, or 2.62 per cent, higher to $43.50.