Woolies toasts spin-off success

WOOLWORTHS could release as early as Monday the demerger documents for the highly anticipated spin-off of its hotels and drinks business Endeavour Group, with the pubs, clubs and liquor retailer expected to attract a valuation as high as $15bn as it enjoys a sales and earnings bonanza.

Shareholders in Woolworths will be offered one share in Endeavour Group for every one share they hold in the supermarket giant as part of an in-specie distribution, a source within the company said.

Investors have become increasingly excited about the expected spin-off of Endeavour Group, the arm of Woolworths which holds its hotels joint venture with the Mathieson family as well as its Dan Murphy’s liquor chain and a stable of other wine businesses.

This excitement has risen as further evidence appears of strengthening sales of liquor as well as a return to much better trading at the hotels.

The demerger, which was first announced in mid 2019 but was delayed due to COVID-19, was to initially attract a valuation of about $10bn when it floated on the sharemarket but a number of informal bids for the group and a rebound in trading has put a rocket under its worth.

It is expected the demerger documents will show improved trading across the hotels and liquor retail businesses that could attach a valuation of $15bn. This has been strengthened by informal takeover offers made for the business, including a recent one of about $14bn.

A spokesman for Woolworths said the Endeavour Group demerger remains on target for late June.

“Key milestones during the quarter include securing financing commitments for Endeavour Group’s proposed debt facilities and finalising board and management appointments which will be announced in due course. Subject to board and regulatory approval, demerger documentation is expected to be released in mid-May.”

In 2019 Woolworths unveiled its plans to demerge its hotels and liquor arm, claiming the separation would allow Woolworths to benefit from a simplified organisational structure, a greater focus on its core food and everyday needs markets and opportunities to continue to build the “Woolworths retail ecosystem”.

Separation will also allow Endeavour Group to realise its full potential through business simplification and efficiencies with greater access to capital to pursue investment and growth, Woolworths said at the time.

In late 2019 Woolworths obtained shareholder approval to begin the demerger process for Endeavour Group.