Woolworths Group Ltd has announced it will combine its drinks and hospitality businesses into a single entity and then separate the business through a demerger. Endeavour Drinks and ALH Group will become Endeavour Group Ltd. It is expected to occur in calendar year 2020. 

Woolworths group chairman Gordon Cairns says the board believes the merger and separation is in the "shareholders’ best interests ... It reflects the board’s focus on maximising long-term shareholder value".

Woolworths Group CEO Brad Banducci says the Group has “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.”

In a statement, Woolworths group says the separation will allow the business 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.

The merger will create Australia’s largest integrated drinks and hospitality business, it says. Endeavour Group will consist of 1500 BWS and Dan Murphy’s retail drinks outlets and 327 ALH hotels. ALH retail drinks outlets currently make up 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. Sales are expected to be around $10 billion and EBITDA1 of $1 billion.

Other businesses to be included in the merger include Endeavour Drinks’ own and exclusive brands business, Pinnacle Drinks; Langton’s fine wine auction and retail business; Cellarmasters wine subscription business; and an 8.7 per cent stake in ALE Property Group.

After the merger, Endeavour Group will be 85.4 per cent owned by Woolworths Group and 14.6 per cent by Bruce Mathieson Group (BMG). If demerged, Woolworths Group is expected to retain a minority stake reflecting the importance of the partnership. 

BMG’s Bruce Mathieson says the 15-year partnership with Woolworths has been “long and successful” and the decision to separate is a “natural evolution”. “This transaction is the natural evolution of the partnership and will allow Endeavour Drinks and ALH to reach their full potential,” Mathieson says.  

Management changes

As part of the separation process, Woolworths Group CFO David Marr 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. 

Finance director, Australian Food, Stephen Harrison will take over from David as Woolworths Group CFO, effective 1 August. David will continue to support Steve during a transition period including the delivery of the full year results. 

Woolworths Group portfolio director will continue to lead the shareholder aspects of the transaction.

Banducci says: “David has been Woolworths Group CFO for five and half years and has made a significant contribution to the Group over this period. Given the commitment required to oversee the merger and separation process, we have asked David to make this his primary focus. 

“We are delighted that we have someone of Stephen Harrison’s calibre to take over as CFO, which is testament to the Group’s strong talent pool and succession planning process. Stephen’s experience as finance director for Endeavour Drinks and subsequently Woolworths Supermarkets and Australian Food (including WooliesX) will be invaluable in his new role. 

“Finally, I would also like to recognise the efforts of Colin Storrie and the Portfolio team over the last 12 months, who in addition to managing the sale of our Petrol business, have overseen the extensive preparation work relating to this transaction.”

The merger of Endeavour Drinks and ALH is expected to complete in the second half of calendar year 2019, subject to final Board approval, third party consents, regulatory approval and completion of the restructure. The process of restructure of Endeavour Group is expected to be subject to Woolworths Group shareholder approval. It is currently anticipated that shareholder approval will be sought at Woolworths Group’s 2019 AGM.

A subsequent demerger or alternative transaction is currently expected to complete in calendar year 2020. 



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