Australia’s largest publican is set to go it alone, as shareholders approve the demerger of Endeavour and ALE quietly divests more of the coveted ALH freeholds.
On Friday 360k Woolworths shareholders overwhelmingly approved the spin-off of Endeavour Group from the parent company, paving the way for it to begin trading on the ASX as a separate entity from 24 June.
Woolworths (ASX:WOW) shareholders will be given one share in Endeavour for every Woolworths share they already own. An estimated value of $6.10 has been put on Endeavour shares. WOW closed today at $43.02 – up $0.30 from Friday.
The supermarket giant will retain a 14.6 per cent stake in Endeavour for the immediate future, but has the option of selling this also. Pub giants the Mathieson family will also retain 14.6 per cent in Endeavour.
The company reported $10.6 billion in sales for FY20, producing $693 million EBIT.
Endeavour holds over 1600 retail liquor stores branded Dan Murphy’s or BWS, as well as specialty brands and manufacturer and wholesaler Pinnacle Drinks. It is also holder of the largest collection of licensed pubs, counting 332 locations.
Management has confirmed an ongoing strategy of acquisitions, despite negative press stemming from its near 300 pubs with EGMs, numbering over 12k. The gaming operation is said to produce $700 million in revenue, which amounts to around half of the hotels division’s takings.
The group’s largest landlord is the ASX-listed ALE (ASX:LEP), which broke with tradition recently to begin selling off some of its prized freeholds, all on secure leases to ALH. In mid-April four ALE freeholds sold at a greater than 20 per cent premium to book value.
Earlier this month ALE divested the freehold interest in the Boundary Hotel in Melbourne’s Bentleigh East to a private investor for $33 million, achieving a 30 per cent premium to book on a yield of around 4.25 per cent. The Hotel is leased to ALH until 2028, with four further 10-year options.
ALE has now put up the freehold interest in the Tudor Inn, in Cheltenham, in Melbourne’s south-east. It too is on a triple net lease to ALH expiring 2028, with four 10-year options.
The property is in walking distance of the Charman Road retail precinct and Cheltenham Train Station, and nets annual income of $592,855. A similar result would see sale price around $14 million.
A sale campaign for the Tudor Inn is being conducted by CBRE Melbourne’s Nathan Mufale, David Minty, Scott Hawthorne and JJ Heng, and CBRE Hotels’ Mat George, with a tender process closing in July.
