Woolworths has revealed further updated details about its plans surrounding the proposed Endeavour Group demerger.
The demerger is the final stage of a process that was announced in 2019, which was put on hold in 2020 due to the uncertainty of the pandemic. This process saw the combination and restructure of Endeavour Drinks and ALH Group to form Endeavour Group, intended to be “Australia’s leading retail drinks and hospitality business”. Endeavour Group also includes Jimmy Brings, Shorty’s Liquor, Langton’s and Cellarmasters.
In a shareholder meeting today, Woolworths Group directors unanimously recommended that shareholders vote in favour of the demerger, with all directors intending to also vote in favour.
Woolworths Group Chairman, Gordon Cairns, said: “The Woolworths Group Board believes that a demerger of Endeavour Group will enhance shareholder value and it will create two leading ASX-listed companies. We believe both businesses, post demerger, have strong future prospects and will benefit from greater simplicity, focus and ongoing partnership.”
At the time of demerger, Woolworths Group and long-term joint venture partner Bruce Mathieson Group, will each hold a 14.6 per cent interest in Endeavour Group.
The demerger will occur via a distribution of Endeavour shares. Eligible shareholders will receive one Endeavour share for every share held in Woolworths Group.
Endeavour Group would begin trading on the ASX on June 24, 2021, should the shareholder vote approve the demerger at the General Meeting on 18 June 2021. Woolworths Group expects Endeavour Group will become a top 50 ASX while Woolworth Group retains its position as a top 25 ASX company.
What a demerger will look like
In FY20, Endeavour Group reported sales on a pro forma basis of $10.6 billion, EBIT of $693 million and NPAT before significant items of $328 million. It has committed bank facilities of $2.5 billion, with net debt before lease liabilities expected to be $1.4 to $1.5 billion at the time of demerger. The group said the bank facilities will be used to repay borrowings with Woolworths Group and support Endeavour Group funding requirements.
After the demerger, Woolworths Group and Endeavour Group are expected to remain connected through an ongoing partnership that will see benefits across five key areas: supply chain and stores, loyalty and fintech, digital and media, business support, and international.
Endeavour Group will have an independent business strategy, intended to enable the group to realise its full potential with a clear purpose across retail, hotels and the broader business. The Group’s retail segment, as at 3 January this year, had 1,630 stores, while the hotels segment operated 332 venues Australia-wide.
The Group said it will have “a broad mandate for growth with capacity and access to capital to pursue a range of investment and growth initiatives.” A history of such growth was outlined in the demerger presentation, which showed the development of both the retail and hotel arms of Endeavour Group, and outlined the development potential of both.
Endeavour Group CEO, Steve Donohue, said: “We believe that Endeavour Group’s long-term prospects are strong. We have assembled an experienced and proven team, have a leading store network, digital presence and market position. Through living our purpose of creating a more sociable future together we see many opportunities to grow the business and create value for our shareholders.”
Endeavour Group has confirmed to Woolworths Group that it intends to follow Woolworths’ dividend policy, and expects to pay a dividend of 10 – 75 per cent of NPAT for the second half of FY21, subject to the Endeavour Group directors’ satisfaction that the payment is appropriate. Total dividends received by shareholders are expected to be consistent with what the final dividend would have been if the demerger had not gone ahead.
Board and management
Today Endeavour Group also announced appointments to its Board, joining the already announced management team in leading the business.
The non-executive directors-elect that have been appointed include Holly Kramer, Bruce Mathieson Sr, Duncan Makeig, Joe Pollard, Colin Storrie and Catherine West. They will join Peter Hearl, Chairman-elect, Steve Donohue, CEO, and Shane Gannon, Chief Financial Officer, should the demerger go ahead.
Hearl said: “I look forward to working with the directors-elect at this exciting time for Endeavour Group. The Board includes a wealth of local and international experience, a diverse mix of backgrounds and complementary skills across fast moving consumer goods, hospitality, marketing, digital and technology, finance and strategy.”