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Coles Myer buys liquor group
By Geoff Hiscock
SYDNEY, Australia (CNN) -- Australia's biggest retailer, Coles Myer, has bought the major part of the independent Theo's Liquor chain, adding Aust. $175 million (about $100 million) to its annual liquor sales. Coles Myer confirmed the deal Tuesday, a day after announcing it was in the "final stages of negotiations" with Theo's, the No. 4 liquor retailer in Australia with 75 stores in New South Wales and Queensland. Tuesday's deal covers 49 liquor stores and four hotels in New South Wales. Coles Myer said discussions on buying the Queensland business were "ongoing". The purchase price was not disclosed, but observers suggested the whole chain might be sold for A$300 million ($170 million). Coles Myer already has 526 liquor stores under its Liquorland and Vintage Cellars brands, with about A$1.3 billion ($735 million) in annual sales, or about 5 percent of the group's A$25.7 billion ($14.4 billion) annual turnover. Increased firepowerThe deal lifts its outlets to 591 and gives Coles Myer increased firepower in the A$8 billion ($4.5 billion) liquor market, where its big supermarket rival Woolworths has 438 liquor outlets. But it also raises competition questions because the two biggest retailers would have about 40 percent of the liquor market. Coles Myer said Tuesday the purchase is subject to regulatory approvals. The Australian Competition and Consumer Commission has already said it would scrutinize any deal that increased industry concentration and reduced buying competition for smaller suppliers. Coles Myer CEO John Fletcher called the purchase a "strategic acquisition" that would enhance the group's position in the important New South Wales market. Theo's founder Theo Karedis, who started the business 47 years ago, will stay on to help the transition. Share price downColes Myer shares, which closed 0.78 percent lower Monday at A$6.35, are down another 0.3 percent to A$6.33 near midday Tuesday. That is in contrast to a 1 percent gain in the broader market, measured by the S&P/ASX200. Woolworths is up 0.46 percent to A$10.90. Coles Myer stock has fallen 25 percent this year on missed profit forecasts and a long-running boardroom battle that was finally resolved last month when dissident director Solomon Lew was voted off the board. (Full story) Lew, a former chairman of the company and its single biggest shareholder, was opposed by all but one other member of the board. He waged an extensive re-election campaign, claiming he was the only director with broad retail experience. But his opponents, who included Fletcher and chairman Rick Allert, successfully lobbied against his return, saying he had already served for 17 years, he had extensive related-party transactions with the company and he and his family had interests that competed directly with Coles Myer. Earlier this year, the group was looking to spin off underperforming units, with its Myer Grace and Target stores considered the most likely to go. But in October Coles Myer said any restructuring was on hold until at least July 2003. The Theo's Liquor deal is its first acquisition since that announcement.
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