Woolworths to be freed of poker machines in Endeavour deal

Woolworths CEO Brad Banducci, left, has been uncomfortable about poker machines, although chairman Gordon Cairns has been more accommodating. Picture: Aaron Francis

Woolworths boss Brad Banducci has copied rivals Coles with a plan to park his hotel, drinks and poker machine operations in a new vehicle, which in theory will increase the value in both companies.

The supermarket chief plans to combine all his liquor and hotel assets into one company, called Endeavour Group, which would have sales of $10 billion in sales and $1 billion in earnings, and which would then be spun off through a demerger or sale.

Billionaire Bruce Mathieson will swap his 25 per cent stake in the ALH joint venture for a 14.6 per cent interest in the new Endeavour Group, which could be run by his son Bruce Jr.

The Mathieson team also sees today’s announcement as good news because it frees it to concentrate on developing assets that were held back in a wider corporate structure.

The big win for Banducci is that it gets controversial poker machines off Woolworths’ books, which means he will go from owning 12,000 poker machines nationwide, with $1.6 billion in revenues, to a circa 15 per cent stake when the business is finally spun off.

The deal is likely to be completed by a distribution to Woolworths shareholders, who will get, say, four pub shares for every one Woolies share.

With liquor and poker machines off his books, Banducci can concentrate full time on his supermarket operations.

The reality is that this is what’s been happening anyway, but this formalises it and rids Woolworths of a major embarrassment, because Banducci has never been comfortable with the poker machine ownership.

His chair, Gordon Cairns, was more accommodating because they are so profitable.

Former Woolworths boss Roger Corbett created the deal. Woolworths was advised by UBS and Mathieson by JP Morgan. The two sides have been working for over a year on the transaction.