Australian Venue Co is finding renewed strength under new owners PAG, and armed with a new investment chest is ratcheting up its acquisitions.
In August news broke of the $1.4bn deal whereby PAG Asia Capital bought KKR’s 80 per cent stake in the pub group. The transaction has now settled, heralding a new $900 million debt facility that has given the Victorian-based national group greater ammunition for continued growth.
The group is reportedly trading solidly, continuing the uplift seen in FY23 where it recorded revenue of $1.11bn, which was up 56 per cent on the prior, COVID-affected year. Net profit was up 24 per cent, to around $42 million, putting the company on track for an increase in EBITDA for FY24 of around 15 per cent.
AVC has rapidly grown to 215 pubs and bars across Australia and New Zealand, bolstered by 26 venues bought in the past year alone, while offloading only four. Chief executive Paul Waterson says this is comfortably within its capacity, and in line with ongoing plans.
“From the outset we wanted to generate a pub group of scale. To do that we decided to go down a more capital light model rather than owning property.”
Citing core expertise in operations, AVC steers clear of any investment in property it does not operate.
“We could purchase a freehold where we see the potential to add value to the business … before striking a new lease and taking the freehold back out to market,” Waterson explains.
While AVC does not benefit from capital appreciation in a leasehold model, it accepts the trade-off in pursuit of scale and invests heavily in the value of the operation.
“The long tenure of the leases allow us to think long-term and invest in venues – like we own them alongside our landlord partners.”
After its spin-off from parent company Woolworths in 2021, Australia’s largest pub group, ALH, under the broader banner of Endeavour Drinks, began an elevated program of acquisitions.
But by 2023 the new direction had slowed, and beyond the long-awaited approval to buy the Rye Hotel in December, ALH’s activity amounted to divesting the freehold going concern of the Rainbow Beach Hotel, and has since indicated it has stemmed further purchases to focus on lifting returns.
Holding almost 340 pubs, predominantly freeholds, this comes as a notable contrast to AVC’s more agile aspirations.
Waterson says their approach benefits from the diversity of participants attracted to pub investment.
“There will always be passive freehold owners who don’t want to operate venues but love the sector, and see it as a great place to invest.
“For them we would like to fill the space of being a high-quality tenant.”
