Woolworths pushes back hotels and drinks demerger
Billionaire hotelier Bruce Mathieson has backed Woolworths’ decision to push its $10 billion hotels and drinks demerger back to next year, as pubs and clubs are forced into hibernation by the federal government.
Mr Mathieson, who holds 14.6 per cent of Woolworths’ Endeavour Group worth some $1.4 billion, told The Age and The Sydney Morning Herald he thought the decision was “common sense” and that he was “more than happy” to hold off.
“We both thought it was silly to do it this year. We’re in no rush, so there’s no problem,,” he said.
The much-anticipated demerger was set to create Australia’s largest drinks and hospitality business, consisting of nearly 1000 BWS and Dan Murphy’s bottle shop sites and pubs businesses.
However, Woolworths confirmed on Tuesday that the planned spin-off had been iced until next year, with chief executive Brad Banducci leaving the door open for ditching the demerger altogether.
“That’s a fair question to come back to at the end of the year,” Mr Banducci told media on Tuesday when asked about axing the spin-off.
Earlier this year, the retailer finalised the first two stages of Endeavour’s demerger, which involved simplifying the business’ structure and formalising the close working arrangements between Woolworths and BWS in contracts.
Woolworths’ drinks businesses and its 75 per cent stake in ALH were recently rolled into the new Endeavour entity, which sits inside the broader Woolworths Group.
In February, Mr Mathieson’s 25 per cent stake in ALH was swapped for a 14.6 per cent stake in Endeavour.
The company’s planned to demerge the company through an IPO in calendar 2020, while possibilities of a trade sale had also been floated.
Mr Mathieson said there were “people there” interested in purchasing the business but added it would unlikely be the case in the current environment.
“I don’t know how keen people would be in this market, but you don’t know? It is what is,” he said.
The government’s recent lockdown policy has also stymied Endeavour’s demerger plans, with pubs and hotels falling into the ‘non-essential’ services bucket.
Over 8000 ALH staff stood down on Monday, Woolworths said.
The company is trying to re-employ as many affected staff members into other divisions of the company as possible, with 650 already offered roles and a further 2000 set to be deployed in the next 24 hours.
Mr Mathieson was broadly supportive of the government’s choice to suspend trading of pubs and pokies venues but said he would have preferred to see a complete lockdown.
“If you’ve got to do it, close everything down. Get it over and done with,” he said.
“I think they’re doing the best they can, but if people don’t do the right thing and behave themselves…you’ve just got to close them down.”
In the 2019 financial year, Woolworths’ hotels business accounted for 2.6 per cent of the company’s revenue, but around 10 per cent of earnings.
Mr Banducci said it was too early to tell if the surge in supermarket sales would offset the likely losses in the hotel division.
“Every day brings its own series of changes and challenges,” he said.
Woolworths also reported on Tuesday it had seen strong sales growth across its operations and expected that all segments of its retail businesses, including department store Big W, would stay open in the case of a shutdown.