- Woolworths announced a merging of and subsequent separation from its alcohol and hospitality businesses to form a new entity called Endeavour Group
- The separation from these business will allow Woolworths to focus more on being a grocery store and everyday needs market
- It will create Australia’s biggest drinks and hospitality business, expecting sales of roughly $10 billion
- Woolworths will keep a minority holding in the demerged Endeavour Group
Woolworths has announced a merging of and subsequent separation from its alcohol and hospitality businesses Endeavour Drinks and ALH Group, to form a new entity called Endeavour Group.
Endeavour Drinks is home to 1500 BWS and Dan Murphy’s stores around the country. ALH owns over 1200 poker machines and 200 pubs — making Woolworths the single largest owner of poker machine licences in the country.
The separation from these business will allow Woolworths to focus more on being a grocery store and everyday needs market.
The merger and separation of Endeavour Drinks and ALH will also create Australia’s biggest drinks and hospitality business, expecting sales of roughly $10 billion and an earnings before tax, interest, depreciation and amortisation (EBITDA) of $1 billion.
Of course, this means Woolies will miss out on its slice of these massive profits.
Despite the potential loss of revenue brought in by Endeavour Drink and ALH, however, the market seemed to approve of the Woolworths taking its name out of the somewhat controversial gambling and alcohol business.
Woolworths shares are currently up 2.7 per cent to trade for $33.82 per share today.
Woolworths CEO Brad Banducci said the separation simplifies the company and gives it more agility.
“Over the past three years we have progressively moved from a period of fixing the basics as part of our turnaround to investing for the future as part of our transformation,” Brad said.
Some investors and anti-gambling organisations have been urging Woolworths to cut ties with its pokie machines for years, claiming they taint the name of the family-focused ‘fresh food people’.
Woolworths Chairman Gordon Cairns said the merger and separation was decided upon after careful consideration of the future of both businesses.
“The board believes that a merger of Endeavour Drinks and ALH followed by a separation, is in shareholders’ best interests and will benefit customers and team members of both groups,” Gordon said.
“It reflects the board’s focus on maximising long-term shareholder value,” he said.
Bruce Mathieson Senior from Woolworth’s ALH joint venture partner Bruce Mathieson Group (BMG) said this “natural evolution” of the partnership with Woolworths will allow Endeavour and ALH to reach their full potential.
“Woolworths Group and BMG have enjoyed a long and successful partnership in ALH since 2004 which has created significant value for both sets of shareholders,” he said.
Woolworths will keep a minority holding in the demerged Endeavour Group to keep the partnership alive.
The companies are expected to be merged by the end of this year, and the subsequent separation from Woolworths will take place in 2020.