Redcape delisting puts dampener on Australian Venue Co float hopes

Australian Venue Company owns 165 pubs. Picture: Jake Nowakowski

Redcape Hotel Group’s decision to delist from the Australian Securities Exchange is expected to place a dampener on plans by KKR’s Australian Venue Company to head to the market.

AVC, owned by Kohlberg Kravis Roberts, has been making efforts to list for some time, but it pulled its initial public offering plans in the final hour about three months ago citing concerns about trading conditions linked to Covid-19.

The company, which owned 165 pub venues, had hopes for a $900m market value and raise at least $352m, but the thinking is that a growing number of institutional equity investors are shying away from such offerings as they increasingly take ethical investing decisions into account.

Like Redcape, the business has venues with highly profitable slot machines that make investors wary about gambling addictions from patrons.

Woolworths’ listed spin-off Endeavour Drinks also has pubs with slot machines as well as liquor stores and has traded strongly since it demerged from the supermarket giant.

But the thinking is that demand for such a business is limited in the public market and there may not be enough to see AVC also perform strongly.

However, demand in the private market from other investors is still thought to be strong due to the slot machine-fuelled profitability of pubs amid low interest rates.

Redcape announced its decision this week while delivering its half-year results. It said that, despite support from lenders and communities, it was not able to raise capital because of an irrational share price.

Sources say an alternative plan for AVC is to reduce the proportion of pubs it has with slot machines over time before heading to the boards. However, industry experts say generating profits from pubs without slot machines can be challenging.