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Woolworths (ASX: WOW) has announced today it is selling $636 million of its stake in liquor and hospitality operator Endeavour Group (ASX: EDV), with plans to use the capital for strategic investments.
Following the sale which represents 5.5 per cent of EDV shares on issue, the grocery giant will retain a 9.1 per cent stake in Endeavour Group and has advised the market it has no current intention to undertake a further selldown in the short to medium term.
Woolworths is set to use the funds to acquire more than 50 per cent of the parent company of pet accessories retailer PETstock. If the deal does go ahead, it would value the business at around 11-times EBITDA.
When approached by Business News Australia, Woolworths declined to comment on the matter.
This morning, Woolworths CEO Brad Banducci told shareholders the proceeds will be used for strategic investments and general corporate purposes.
“Our decision to reduce our stake comes after a successful transition from ownership to partnership with Endeavour Group,” Banducci said.
In July 2019, Woolworths (ASX: WOW) announced its intention to combine its drinks and hospitality businesses, Endeavour Drinks and Australian Leisure and Hospitality Group (ALH) into a single entity now known as Endeavour Group.
The move created one of Australia’s largest integrated drinks and hospitality companies, with sales of approximately $10 billion and EBITDA of $1 billion at the time of the merger. Two years later, Endeavour Group would demerge from the supermarket giant and list on the ASX.
Today, the entity operates more than 300 bistros, 900-plus bars and more than 2,400 accommodation rooms. The group also owns liquor brands such as Dan Murphy's, BWS, Shorty's Liquor, Pinnacle Drinks and Langton's Fine Wines.
Woolworths’ selloff comes almost a month after ALH was issued 62 charges by the Victorian Gambling and Casino Control Commission (VGCCC) for allegedly failing to install mandatory pre-commitment technology in gaming machines.
ALH is alleged to have operated 220 gaming machines for up to five weeks without YourPlay enabled, which is a card-based tool that allows players to set limits on the money and time they spend using gaming machines.
The poker machine operator is facing up to $1.35 million in fines for the alleged breaches.
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