Coles has released the independent expert's report commissioned for the Wesfarmers bid. You can find it at the ASX announcements page (link). You can find an example of the media reaction to it here. Crikey's Adam Schwab gets it about right when he states (link):
We'll have a look at the expert report in detail in class 11.Grant Samuel’s full 187-page Independent Expert’s Report on Coles Group was finally released on Monday. The Report notes that while Wesfarmers’ offer “does not deliver a full premium for control” shareholders are better off voting in favour of the deal. Grant Samuel values Coles at between $16.21 and $18.23 per share. The only thing is, the Expert noted that “the valuation range exceeds the price at Grant Samuel would expect Coles Group shares to trade in the absence of the Wesfarmers proposal.”
In short, what Grant Samuel effectively said was that - “We think the company is worth $20 billion – the only problem is, no one who is actually willing to spend money to buy Coles shares thinks that.”
Grant Samuel’s valuation is based on both a discounted cash flow model (which is highly subjective and can be wildly affected by the forecast growth rates and discount rates assumed) and the capitalisation of earnings method (which involves a comparison of multiples such as EBIT, EBITDA and net profit with comparable companies).
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