Woolworths delays $10bn Endeavour drinks group spin-off

Woolworths’ has pushed back this year’s planned $10bn separation and possible float of its hotels and liquor business.

Customers in Dan Murphy’s in Hervey Bay's in Queensland this week.

The global coronavirus pandemic has killed off this year’s planned $10 billion separation and possible sharemarket float of Woolworths’ hotels and liquor business, Endeavour Group, in a sign that the virus will likely quash any major business deal and IPO this year.

Woolworths confirmed that the planned separation and possible float of Endeavour would be pushed off to 2021 due to the uncertainty caused by the pandemic.

Woolworths also said it had decided not to provide guidance for the second half at present, but could provide an earnings outlook later.

But Woolworths said in an ASX statement issued on Tuesday that it had experienced a large uplift in sales at its grocery chains in Australia and New Zealand in the wake of panic buying in both countries.

Putting the Endeavour Group spin-off on ice puts an end to plans kickstarted almost nine months ago by Woolworths to structurally separate ALH hotels and pubs businesses and the liquor chains Dan Murphy’s and BWS into a new business that was likely be sold this year.

But these plans were put in turmoil as the government ordered hotels and pubs to close this week in an attempt to slow the spread of the coronavirus.

“Given the impact of the government directive to close hotels for an extended period and current financial market conditions, the Woolworths Group Board has made the decision to defer the separation of Endeavour Group from Woolworths Group until calendar 2021, with the specific date subject to ongoing review,” Woolworths said on Tuesday.

“Given the significant uncertainty associated with current sales performance, changes to customer shopping patterns including pantry stocking and the closure of the hotels business for an extended period, Woolworths Group is not able to accurately forecast the net impact of COVID-19 on the financial year 2020 results. Further updates on the impact of COVID-19 on the Group’s performance will be provided as appropriate.”

But Woolworths chief executive Brad Banducci confirmed sales at its supermarkets were strong.

“In recent weeks, sales growth across the group’s retail businesses has been strong, with the recent exception of hotels, reflecting unprecedented demand for a range of products as customers have consumed more at home and stocked their pantries.

“This has been particularly pronounced in Australian and New Zealand Food, leading to challenges across the supply chain in keeping up with demand, which has unfortunately led to shortages on store shelves.”

Woolworths chairman, Gordon Cairns, said: “The board is confident that the group remains in a strong financial position and the team are doing everything possible in very challenging circumstances.”