Supermarket giant Woolworths is combining its liquor and hospitality businesses ahead of a divestment next year.
Woolies will merge Endeavour Drinks, which includes Dan Murphy’s and BWS, with the hotels and gaming-focused ALH Group by the end of the current calendar year to create a stand-alone business called Endeavour Group.
“Following the combination, Woolworths Group intends to pursue a separation of the business through a demerger or other value-accretive alternative … in calendar year 2020,” the company said on Wednesday.
Woolworths did not say whether it plans to sell or list the new business, although it does expect to retain a minority shareholding whichever route it takes.
Wesfarmers pursued the latter option last year when it divested supermarket chain Coles, retaining a 15 per cent stake as Woolworths’ fierce rival listed on the ASX.
Woolworths, which has already offloaded its petrol business, said the separation will create a simplified structure and a greater focus on its core food and everyday needs markets.
“The board believes that a merger of Endeavour Drinks and ALH followed by a separation, is in shareholders’ best interests and will benefit customers and team members of both groups,” Woolworths chairman Gordon Cairns said.
Endeavour Drinks and ALH together were responsible for more than 30 per cent of Woolworths’ earnings in the 2018 financial year, with Endeavour Drinks the group’s second-largest contributor after Australian supermarkets in terms of both sales and earnings.
The integrated Endeavour Group will comprise of more than 1,500 BWS and Dan Murphy’s retail drinks outlets and 327 ALH hotels and neighbourhood pubs.
Other businesses to be included in the merger include Endeavour Drinks’ own and exclusive brands business, Pinnacle Drinks; Langton’s, a fine wine auction and retail business; Cellarmasters, a wine subscription business; and an 8.7 per cent stake in ALE Property Group.
Bruce Mathieson Group, the junior partner in the ALH joint venture that includes hotels and pokies, will swap its 25 per cent stake for a 14.6 per cent interest in the new Endeavour Group.
Woolworths chief financial officer David Marr will switch to a chief operating officer role to oversee the project, with Stephen Harrison taking over as CFO on August 1.
Woolworths’ shares were worth $32.93 before trade on Wednesday, down 5.4 per cent from a four-year peak of $34.82 in May, but still 11.83 per cent higher for the calendar year.