Coles in talks to buy Greencross Pet Wellness for $4B

• Coles is in discussions with private equity firm TPG to acquire Greencross Pet Wellness.
• The grocery giant's shares dropped 4.2% following the announcement and a regulatory setback.
• The acquisition represents a potential expansion strategy into the pet care sector to find new growth.

Coles Group (ASX:COL) confirmed it is in talks with US private equity firm TPG to acquire Greencross Pet Wellness for an estimated valuation of approximately $4 billion.

The market reaction was also influenced by the Australian Competition and Consumer Commission blocking the retailer from leasing a new supermarket and liquor store site in Western Australia.

"Coles will only pursue the acquisition if it can generate strong shareholder returns," said Coles CEO Leah Weckert.

The business previously approached TPG nearly a year ago regarding the acquisition, which would add a major pets and veterinary network to its retail portfolio.

Following the announcement, the Coles Group share price was down at $23.35.

The potential transaction follows a period of heightened regulatory scrutiny for the retailer as it seeks to expand its footprint outside of traditional grocery lines.

The company has been exploring new market opportunities since it was spun off from parent company Wesfarmers (ASX:WES) in 2018.