Coles Myer Ltd. ABN 11 004 089 936 800 Toorak Road, Tooronga, 3146 Telephone (03) 9829 3111 Facsimile (03) 9829 6787 Postal Address: PO Box 2000, Glen Iris, 3146 News Release 6 September, 2006 Coles Myer Board rejects highly conditional proposal The Coles Myer Board today rejected the highly conditional proposal by a leveraged buyout consortium to acquire the company at an indicative price of $14.50 per share. CML Chairman, Rick Allert, said the consortium’s proposal substantially undervalued the company and its prospects and was not in the best interests of shareholders. The proposal was also unacceptable because the extent of its conditionality meant that there was no certainty on any aspect of the proposal or indeed any obligation on the consortium to proceed. The proposal: - was expressly stated to be non-binding - was subject to unspecified and potentially open-ended due diligence - provided no certainty on the availability of debt finance, which was subject to satisfactory due diligence, unspecified conditions precedent and negotiation of binding loan terms - provided no certainty on the availability of the leveraged buyout consortium’s own equity finance, and - provided no clarity on the terms and conditions of a proposed scheme of arrangement with the company “With such a conditional proposal, the consortium is effectively seeking a free option over the company,” Mr Allert said. The Board had reached its decision after carefully reviewing the proposal received on August 18 and taking advice from its external advisers, Carnegie Wylie & Company, Deutsche Bank and Freehills. “The indicative price proposed substantially undervalues a unique and exceptional group of businesses which have more than doubled profitability and earnings per share over the past five years, and which produce a return on investment of nearly 30%. “The consortium’s timing and indicative price are highly opportunistic. Since its approach to the company, the consortium has merged with a potential rival, clearly indicating it seeks to acquire Coles Myer in an environment of the least competition and for the lowest price. “The Board has no intention of handing across billions of dollars of value that belongs to our shareholders to a third party.” Mr Allert said the company was well progressed with an extensive transformation program that would deliver higher profits and greater value for shareholders. “The company’s new strategic direction outlined on July 31 will also drive substantial shareholder value through further initiatives to increase sales, cut costs and grow earnings,” he said. 2 At its full year profit announcement on September 21, the company would provide shareholders with clarity on the key drivers of growth emanating from the new strategic direction, as well as the financial outlook for 2007 and 2008. Mr Allert reiterated that the consortium had stated several times that it would only proceed with its proposal if it had the support of the Coles Myer Board. Such support would also be required for the consortium to effect a transaction by way of a scheme of arrangement. CML has been advised that the participants in the syndicate presently comprise Bain Capital, Blackstone, Carlyle, CVC, KKR, Macquarie Bank, Merrill Lynch, Texas Pacific/Newbridge and PEP. -- // -- More information: Media Scott Whiffin 03 9829 5548 Analysts John Di Tirro 03 9829 4521 6 September 2006 Dear shareholder The Coles Myer Board has today rejected the highly conditional proposal from a leveraged buyout consortium to acquire the company for an indicative price of $14.50 per share. After carefully reviewing the proposal and taking advice from our external advisers, Carnegie Wylie & Company, Deutsche Bank and Freehills, we have concluded that the proposal substantially undervalues the company and its prospects and is not in the best interests of shareholders. The proposal is also unacceptable because its conditions mean there is no certainty on any aspect of it or any obligation on the consortium to proceed with it. The consortium was effectively seeking a free option over the company. The indicative price proposed by the consortium substantially undervalues this unique and exceptional group of businesses that have more than doubled profitability and earnings per share over the past five years. The timing of the approach and the indicative price are highly opportunistic. Since its approach to the company, the consortium has merged with a potential rival, clearly indicating it seeks to acquire Coles Myer in an environment of the least competition and for the lowest price. The Board has no intention of handing to a third party billions of dollars in value belonging to you, our shareholders. The company is well progressed with an extensive transformation program that will deliver significant value to shareholders. The company’s new strategic direction will also drive substantial shareholder value through further initiatives to increase sales, cut costs and grow earnings. I will provide you with information on the key drivers of growth emanating from the new strategic direction, as well as the financial outlook for 2007 and 2008, following the company’s full-year profit announcement on September 21. 800 Toorak Road, Tooronga, Victoria, Australia. P.O. Box 2000, Glen Iris, Victoria 3146 Telephone (03) 9829 3111 Facsimile (03) 9829 6874 Internet www.colesmyer.com In the interim, please contact our shareholder information line on 1300 130 278 (for overseas callers +61 3 9615 9134) if you have any questions. Thanks for your continuing support of the company. Yours sincerely Rick Allert
CML Price at posting:
0.0¢ Sentiment: Buy Disclosure: Held
