Australia’s largest publican, ALH, is clawing back in its plan to turn the balance sheet around, securing approval by the ACCC to proceed with purchase of Victorian landmark the Rye Hotel.
ASX-listed Endeavour (ASX:EDV) agreed in June to purchase the large-format pub from long-time owner Peter Houghton, for a price believed to be close to $50 million.
The well-established venue, on the Rye foreshore, is popular with tourists, families and locals, and considered an important part of the community. It boasts a sports bar, bistro, conference and function spaces, live entertainment, and 43 premium accommodation rooms.
But in September news emerged that the regulator was concerned that the purchase would negatively impact competition for retail in the area, as the Hotel’s thriving Thirsty Camel drive-through bottleshop was the only comparable and proximate rival to the BWS in Rye, already owned by Endeavour.
The news dealt another blow to the share price of Endeavour, which had spun off from parent company Woolworths and listed mid-2021, the value immediately falling to a new low of $5.16. In mid-November it stumbled again, reaching another new low of $4.77.
Major shareholder Bruce Mathieson, who controls 15 per cent of Endeavour shares, has criticised the company’s leadership for what has been an underwhelming performance, particularly viewed against comparable hospitality rivals such as Australian Venue Co. Mathieson has led a campaign for a renewal of the board.
This week the company began its formal fight-back, unveiling plans at an investor day in Sydney to increase shareholder value by more than 10 per cent per year, beginning FY26. It aims to grow EBIT by more than $150 million over the next five years.
It’s suggested this growth will be led by property investment and operational optimisation, across the portfolio of around 350 hotels around the country. CFO Kate Beattie said Endeavour Group will be specifically targeting the “laggard” bottom 20 per cent of its hotels, looking at streamlining costs, opportunities around renewal, and divestment.
“With an unparalleled portfolio of assets, we’re excited about the potential to create great guest experiences and generate growth across all aspects of our hotels, from food and beverage to functions, gaming and accommodation,” offered Endeavour CEO Steve Donohue.
But pundits question the roadmap, in the wake of modest sales growth in an environment of rising costs, and regulatory pressures around gaming, which are likely to prevent it leading the recovery charge.
EDV shares rallied at the news, rising to $5.20 by the end of Wednesday.
The following day the group welcomed the announcement that the ACCC would not oppose its proposed acquisition of the Rye Hotel.
“We know many Victorians hold fond memories of summers spent at the Rye Hotel, we look forward to working with the team and local community to maintain the fantastic qualities that make the Rye Hotel so well-loved today,” offered an Endeavour Group spokesperson.
Despite the win, EDV’s share price slumped again, closing today at $5.05.
