The Coles Group Ltd (ASX: COL) share price has jumped 4% after the company announced it had ended talks to acquire Greencross.
Coles is the second-largest supermarket business in Australia, while Greencross is a large vet business and retailer with its Petbarn business.
Greencross talks end
Coles has made an announcement to the market following on from the update at the start of July that it was in talks with private equity group TPG Capital to potentially acquire Greencross.
The supermarket business said that it has ceased discussions with TPG Capital.
Coles said it applies a “disciplined” approach to acquisitions. As one of Australia’s leading retailers, it regularly assesses strategic opportunities that may complement its existing business.
What does this mean for Coles?
Clearly, investors like the news that Coles will not be going ahead with buying the business.
It would likely have cost Coles a few billion dollars to get the deal over the line. TPG isn’t going to sell for a low price – it’s not a forced seller. Overpaying would erode value for owners of Coles shares, so the removal of that risk is boosting investor confidence.
I can understand why Coles was considering the business. Woolworths Group Ltd (ASX: WOW) owns Petstock, another of the biggest players in the pet space, so buying Greencross would allow Coles to challenge Woolworths and also diversify its earnings.
But, that no longer seems to be on the cards.
Is this a good Coles share price to invest in?
The market has already reacted to the news that Coles is stepping away, so I don’t think this is the best short-term price to invest.
The company does have a promising future, in my opinion. It offers very defensive earnings and can benefit from Australia’s growing population.
It’s also one of the solid ASX dividend shares considering its annual dividend continues to grow
