Carlyle firming as likely buyer for Woolworth’s Endeavour drinks arm

The big question for Endeavour, which houses the Dan Murphy’s liquor chain, is whether Carlyle will be able to pay a higher price for the business than the market would following a demerger.

Carlyle is coming under increasing focus at a time that a growing number of market observers believe it is firming as a likely buyer of Woolworth’s $10bn-plus Endeavour drinks business.

The big question for Endeavour, which houses the Dan Murphy’s liquor chain, is whether the US-based buyout fund will be able to pay a higher price for the business than the market would following a demerger.

Weighing in favour of a demerger is that the move would be tax-free for Woolworths, whereas a sale comes with a tax liability.

Carlyle is likely to be able to pay only about $1.5bn from one of its funds.

Any buyer of Endeavour needs $5bn worth of equity, with some suggesting that any interested acquirer would have to offer more than $13bn for it to be successful.

However, in other transactions, private equity firms like Carlyle have got investors in their funds to co-invest in transactions.

Carlyle would be likely to tap a major investment bank such as Credit Suisse, Jefferies, Morgan Stanley or Goldman Sachs for funding its bid, at a time that debt remains cheap.

Other groups around the hoop on Endeavour Group include BGH Capital and Apollo.

Jarden Australia, Citi and UBS are advising Woolworths.

JPMorgan is advising Endeavour’s other shareholder, Bruce Mathieson.

Woolworths told the market in its half-year results last month that it would “most likely” divest Endeavour through a demerger around June.

No process is under way for private equity groups to bid for Endeavour but it is understood that informal talks are taking place.

Most in the market believe the supermarket group will run a dual-track process for the business to determine whether buyout funds will pay up for the operation.

Mr Mathieson is keen to retain some ownership.

Endeavour houses more than 537 retail liquor outlets, and a nationwide stable of 323 licensed pubs.

The liquor arm of the business posted earnings growth of 24.1 per cent and a sales uplift of 19 per cent for the first half of the 2021 financial year to $5.7bn, despite shuttered pubs and other challenges posed by the health crisis.