All the chest-beating about the Coles board extracting a great price from Wesfarmers has been laid to waste by investors this morning when shares in both companies tumbled in a stronger market.

Wesfarmers plunged $2.84 to $42.89, meaning the stock is back to having underperformed the All Ords over the past year and won’t be in the top 10 once it swallows 100% of Coles.

When Wesfarmers closed above $45 on Friday night, investors were expecting it would only be buying 50% of Coles supermarkets and would screw a good price out of the board given all the private equity rivals had disappeared.

A weekend can be a long time in corporate deal making because Wesfarmers emerged from negotiations offering an additional $4 billion in cash and an arguably excessive 44% of its expanded share base for control of the faltering Coles empire. Today they are being punished for going over the top.

With Coles shares diving 65c to four month low of $15.47 this morning, Solly Lew is now looking like the ultimate winner having taken cash in April at $16.47-a-share for the 5.9% stake held by Premier Investments.

The Coles board has now failed to add value by rejecting KKR’s albeit conditional second offer of $15.25 in cash last October – which clearly did not “substantially undervalue” the company given the time value of money and the almost 20% rise in the market since then.

The much-trumpeted $17.25 is now a figment of John Wylie’s imagination because this 34-page presentation by Wesfarmers yesterday did not convince the market. That said, it will be the performance of Wesfarmers shares over time that ultimately determines who got the better of this deal.

Whilst Wesfarmers CEO Richard Goyder was busily spruiking himself to dozens of media outlets yesterday, it didn’t help having Roger Corbett on Lateline Business last night hopping into the backward IT systems of both Coles and Bunnings and stressing how “complex” the integration challenge would be.

Woolworths is also being rewarded for discipline in not going over the top in its failed offers for Target, Officeworks and Kmart. Shares in what will still be Australasia’s biggest and most valuable retailer jumped 54c to $27.89 this morning.

Whilst Wesfarmers was the only genuine bidder, there is now a three month window for Woolworths to team up with a private equity rival to launch an on-market raid for Coles. If debt markets recover and Coles shares stay weak, this is a serious possibility given all the due diligence that’s been done.

Similarly, in this era of raids and break-up, there must be some players crunching the numbers on Wesfarmers itself which is about to become the most unwieldy conglomerate since the glory days of Pacific Dunlop’s ill-fated expansion into food.