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Will Woolworths follow Coles’ lead and sell off pokies?

Wed, Mar 13, 9:30am by Staff Writer

Australian supermarket chain Coles last week disposed of its interest in poker machines, leaving competitor Woolworths in its wake.

In a statement issued last week, Coles revealed it signed a deal with Australian Venue Co to no longer control its 87 hotels in Queensland.

The deal is estimated to be worth A$200 million. Currently, approximately 3,000 poker machines are being operated by Coles’ Spirit Hotels businesses.

The newly-signed deal would put the Spirit Hotels in the hands of private equity firm KKRs Australian Venue Co, with Coles given the power to manage and benefit from the revenue generated by Vintage Cellars and 243 Liquorland stores, as well as First Choice.

Announcing the joint venture company, Queensland Venue Co, to the Australian Stock Exchange, Coles Group said the structure: “will allow both parties to focus on their core competencies, whilst having joint oversight over the entire operation.”

The joint oversight means Coles cannot fully claim to no longer be involved in gaming, though it can accurately claim to no longer be profiting from it.

A Coles spokesperson said: “Spirit Hotels has never been material to Coles’ earnings.

Following the transaction, Coles will not receive any earnings from hotel.”

Acknowledging the structure, the Coles spokesperson went on to say that: “Coles remains committed to industry best practice in responsible service of alcohol and responsible gaming operations.”

The transaction is likely to be completed by the end of the 2019 financial year, subject to regulatory approval and some individual landlord negotiations pending.

Coles said liquor and gaming regulators had been “engaged and indicated they have no objections with the structure.”

This Coles deal was commented on by the spokesman for the Alliance for Gambling Reform Tim Costello, who praised the supermarket, retails and consumer services chain for its decision.

Mr Costello further shared his hopes that the new owner, Australian Venue Co, would continue Coles’ campaign regarding the introduction of maximum A$1 bets.

In 2017, Woolworths chairman Gordon Cairns cast doubt over the benefits of A$1 pokie limits and questioned whether it would help problem gamblers.

Woolworths the first to introduce pre-commitment system

Woolworths became the first hotel operator in the country to introduce a voluntary pre-commitment system, which provides players with the opportunity to set a maximum time or spending limit on a poker machine.

Mr Costello also insisted that Woolworths needed to follow Coles’ lead and divest itself from poker machine ownership.

Australia’s supermarkets have faced considerable backlash in recent times from local anti pokie campaigners and shareholders, urging them to dispose of the machines.

Woolworths is currently the largest poker machine operator in Australia, owning more than 12,000 machines operated by its Australian Leisure & Hospitality venture, of which it holds a 75 per cent stake.

The machines are located in 330 pubs across Australia, with Woolworths receiving A$1.6 billion from its hotels and gaming businesses in 2018, according to Casino Guardian.

Coles earned just A$185 million from the machines it owned by comparison.

Management of Coles had repeatedly indicated that it was ethically uncomfortable with the company’s 3000-odd poker machine ownership spread among pubs and clubs, when it was owned by Wesfarmers.

Coles’ new chief executive Steven Cain was reluctant to agree with this notion, instead declining to repeat the same concerns amid initially talking down the prospect of a short term sale.

Coles reported net half-year profit after tax of $381 million for the six months to December 31, down 29 per cent from the same period a year ago.

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