It’s Unofficial: Coles Is Already Sold And Management Will Collect

AS THE dentist might say to you with pliers firmly wedged in your jaw — it wont be long now. For top brass at retailer Coles, especially chief executive John Fletcher, there are a few weeks of acute discomfort, then everyone gets their money.

Last week, for the second time in a year, Coles received a takeover approach and this time management, with its months-old business revival plan already in disarray, decided to play ball.

Officially, the group has only responded to informal approaches from interested parties. In reality this company is sold.

Coles will be flogged to the highest bidder, restructured beyond recognition and Fletcher will be on special offer for the boardroom circuit.

Ill miss the Coles soap opera. Weve had former chiefs such as Brian Quinn who ended up in jail, Dennis Eck, a former professional gambler who nearly got the stock moving, comic appearances from rival Gerry Harvey and endless cameos from billionaire Solomon Lew. And if John Fletcher looks dull in comparison, hell at least be distinguished by the size of his payout.

Thanks largely to the wonders of a bull market, Fletcher and his board could knock back an $18 billion offer from Wall Streets KKR last year on the promise they would perform better.

Four months later, the game is up — on Friday Fletcher catalogued the disappointing sales figures from Coles core business, its supermarkets. Profits will be down at least 10 per cent on those forecast a few months ago to fend off the first raiding party. It was the last straw.

And so much for facing the music. The chief executive and chairman Rick Allert decided to present their update on Friday through a telephone conference. Its easier to deal with a simmering mob of analysts and media this way. Like many operators at this level, Fletcher knows the game — never apologise, never explain. As long as you have board support, you can bluster about a five-year plan even if youll be lucky to be in charge in five months.

But timing is everything. Despite endless failings in the company, not to mention the dodgy contract for meat supplies (discovered through a series of reports in The Age), the new bid for Coles is being prepared as the local market soars into record territory. . The rotten thing about the Coles story is that the rewards thin as you drop through the ranks. The chief responsibility for Coles failure lies with the executives who have the most shares — and those shares are rising.

Fletcher will probably be a leading beneficiary because his contract will almost certainly give him a big payout if there is a takeover during his tenure. Dont you love it! If at once you dont succeed, try, try again. And if that doesnt work, sit back and wait for an informal approach to resuscitate your share price and send you home with an even bigger haul.

It might be uncomfortable in the chief executives chair for John Fletcher but he hardly needs painkillers.

James Kirby is editor of Eureka Report at eurekareport.com.au

jk@eurekareport.com.au

■ Management will not survive the sale process.

■ Senior managers will receive bigger payouts.

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