British retailer Tesco has decided not to pursue a bid for Australian retailer Coles Group, a source said yesterday.
"They viewed it as a massive turnaround being required and a huge resource commitment," the source said, referring to Coles, which has a market capitalisation of A$21 billion ($24 billion) and has been losing market share to rival Woolworths.
The withdrawal of interest from Britains biggest supermarket group leaves conglomerate Wesfarmers and a consortium including private equity giant Kohlberg Kravis Roberts to battle it out for Coles.
Tesco appointed Merrill Lynch to look into a possible Coles offer, sources confirmed last week, but had decided in recent days it was not a sound move. Sources have also pointed out Tesco usually does not buy its way into a mature market but prefers to set up on its own in emerging markets.
The Australian Financial Review reported yesterday that Tescos interest was believed to be waning but negotiations between Wesfarmers and Coles were in the final stages for a start to due diligence.
Wesfarmers emerged as a surprise contender for Coles last month, offering A$19.7 billion for the retailer. Other local newspaper reports said KKR was close to finalising a joint venture with Woolworths to bid for Coles.
Coles put itself up for sale in February after rejecting an A$18 billion private equity bid last year.
