Woolworths to combine then demerge EDG and ALH
Woolworths Group Limited has today revealed its intention to combine Endeavour Drinks Group and ALH Group into a single entity and then separate the new business through a demerger “or other value-accretive alternative”.
The new business, which Woolworths said is likely to be called Endeavour Group Limited, is expected to separate during the 2020 calendar year.
Woolworths Group Chairman, Gordon Cairns, said: “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.
“The decision has been taken after consideration of the future prospects of both businesses and how they can be best realised. It reflects the Board’s focus on maximising long-term shareholder value.”
Woolworths said that the separation will allow it to “benefit from a simplified organisational structure, a greater focus on its core food and everyday needs markets and opportunities to continue to build out the Woolworths Group
retail ecosystem”. However it has been widely reported that Woolworths has been looking at ways to separate itself from the gaming business which is part of ALH.
Woolworths Group CEO, Brad Banducci, said: “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.
“As we look to build customer differentiation in all of our businesses, and prepare for an agile and digitally-enabled future, we have decided to simplify Woolworths Group through a combination and subsequent separation of Endeavour Group.”
The merger of Endeavour Drinks and ALH will create Australia’s largest integrated drinks and hospitality business with sales of approximately $10bn and EBITDA of $1bn. It will comprise over 1500 BWS and Dan Murphy’s retail drinks outlets and 327 ALH hotels. ALH retail drinks outlets currently comprise approximately 35 per cent of Woolworths Group retail drinks sales with 86 Dan Murphy’s and 512 BWS stores owned by ALH at the end of March 2019.
Bruce Mathieson Senior of Bruce Mathieson Group (‘BMG’), Woolworths Group’s joint venture partner in ALH, said: “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.
“This transaction is the natural evolution of the partnership and will allow Endeavour Drinks and ALH to reach their full potential. We look forward to continuing the partnership for many years to come.”
Other businesses to be included in the merger include Pinnacle Drinks, Langton’s, Cellarmasters and an 8.7 per cent stake in ALE Property Group.
As part of the separation process, David Marr, Woolworths Group CFO will move to the new role of Chief Operating Officer, Woolworths Group, with primary responsibility for overseeing the merger and subsequent separation of Endeavour Group. Stephen Harrison, currently Finance Director, Australian Food, will take over from Marr as Woolworths Group CFO, effective 1 August.