By Ian Neubauer
Woolworths made its first investment into a hotel company this week, buying 20 per cent of pub operator ALE Property from Hedley Leisure and Gaming Property Fund (HLG).
The $57 million acquisition represents a per unit share price of $3.34 — 18 cents higher than the Monday trading price but 6 cents lower than the last disclosed net asset value — and entitles HLG the benefit of the value of the next distribution paid by ALE on those securities, estimated at 16 cents per share.
HLG signed the deal to offload what was considered its most valuable asset following the collapse of its share price in March and a subsequent announcement it was fielding enquires from parties interested in acquiring its assets.
“In conjunction with our advisers, the board of HLG has been undertaking a review following approaches it had for all or part of the fund’s assets,” HLG chairman Colin Henson said in an announcement to the ASX. “This included an approach for HLG’s holding in ALR. As a result, HLG has sold the majority of its securities in ALE at an attractive price.”
The deal has reduced HLG’s debt from $805 million to $748 million, improving its gearing and allowing it to focus on its core business — 109 pub freeholds in Queensland and NSW.
HLG has thus far resisted the sale of all but two of its freeholds despite ongoing speculation that primary creditor ANZ is pressuring it do so in accordance to HLG’s financial covenants.
At 2:00pm today, HLG shares were trading at 78.5 cents. Woolworths shares were trading at $29.01 while shares in ALE were trading at $3.18.