Woolworths’ $9bn pubs and liquor spin-off, Endeavour Group, has signalled that a sale or partial sale and leaseback of its $2bn-plus property portfolio could be on the agenda.
Buried in its half-year result last week, the listed Dan Murphy’s owner that is still 9.1 per cent owned by Woolworths, said its cost savings program included maximising property and network resources.
It also said it would optimise partnership value, as it tracked in line with its target to deliver at least $200m of cost savings between the 2024 and 2026 financial years.
The interpretation among some is that Endeavour could sell real estate to could provide it about $1bn at a time it anticipates its full-year capital spending to be between $420m and $480m.
Over the years, the typical candidates to involve themselves in acquisitions of real estate owned by corporates are groups such as Charter Hall and Centuria Funds.
It’s understood that the plan has not been discussed at board level.
But some believe a move to explore a real estate sale could be in the not-too-distant future.
The challenge would be getting the idea past pub billionaire Bruce Mathieson.
Mr Mathieson is not believed to be in favour of the idea, because it would involve what he would view as selling the company’s best assets.
Mr Mathieson made his fortune as one of the country’s most savvy publicans and jointly owned the Endeavour assets with Woolworths before the separate listing.
He’s a veteran of the industry and, with 15.08 per cent of the company, his son is also a director on the board.
The logic for a real estate buyer would be to turn the Endeavour pub sites into multi-use developments to increase their value at a time when the country is in need of more housing to accommodate the higher level of migration.
The other factor to consider as to why it may not happen is that Charter Hall, the obvious buyer, is already overweight towards pubs after its acquisition of ALE Property Group which leases its pubs to Endeavour.
Then there’s also the point in the cycle for the real estate market to consider.
But Endeavour is no doubt keen to add some fire power to its share price after it has failed to perform since its split from Woolworths in 2021.
Endeavour’s property plant and equipment was valued at $2.2bn in its half-year accounts.
Earlier, some thought that if Endeavour traded as merely a liquor retailer, the stock might rerate.
But unwinding the pubs from Endeavour would be extremely complex.
Queensland laws require the two planks to be owned together and, to gain a strong price for the assets, they would likely need to be sold off individually.
Working for Endeavour over the past year has been investment banks Citi and Jarden, while the Mathieson family hired Luminis Partners.
Private equity firms, including BGH Capital, The Carlyle Group and Apollo Global Management, have considered an acquisition of the Woolworths spin-off in the past.
A sale of real estate assets is straight out of the private equity playbook, so perhaps the company is considering the move ahead of a buyout fund that has the same strategy as a defensive play.
Endeavour is Australia’s largest network under the Dan Murphy’s and BWS brands.
Overall, it has the largest portfolio of licensed hotels with a network of more than 1675 stores and 344 hotels.
For the six months to December, Endeavour generated a $351m net profit.
Mr Mathieson, also a major shareholder of Star Entertainment, last year put up a challenge to the board on the back of frustration about what he believes has been poor performance around costs, debt and rebranding and a 20 per cent slide in its share price.
Mr Mathieson is known to be close to former Woolworths boss Roger Corbett – who is an ally of Bill Wavish, the former Woolworths CFO who was last year nominated to stand as an Endeavour Group director at the company’s annual general meeting on October 31.
But he was not voted on by investors.
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