Woolies, pub baron in talks on ALH future

A Dan Murphy's store in Mosman, Sydney.

Negotiations are said to have been reignited between Woolworths and publican Bruce Mathieson over the future of the $3.5 billion ALH pubs and liquor business and some suggest a demerger or sale of the business could be imminent.

Investment banks UBS and Citi had been working for Woolworths on plans for ALH since last year. Mr Mathieson had hired investment bank JPMorgan.

Some suggest progress on a deal could be announced on Wednesday.

Woolworths declined to comment.

The latest talk comes after doubts started to emerge around April that a demerger of ALH would proceed.

At the time, there was thought to be divided opinion within the boardroom about whether demerging ALH was the best plan for the supermarket giant at a time it was struggling with losses from Big W.

But some are asking whether action Woolworths is facing from the NSW Independent Liquor and Gaming Authority has put pressure on the company to speed up plans ahead of its annual meeting in October.

The ILGA this week said it would consider a disciplinary complaint alleging that two ALH-run hotels on the NSW north coast illegally gave free alcohol to gaming machine players to keep them gambling.

Distancing itself from revenue generated from poker machines has been the motivation for Woolworths to divest its interest in ALH for some time, but the dilemma is that the operation is highly lucrative.

Woolworths owns 75 per cent of the ALH venture and Mr Mathieson owns 25 per cent but it is thought he doesn’t have the funds to buy the entire operation.

ALH Group owns more than 330 licensed venues and more than 550 shops across Australia, including brands such as Dan Murphy’s and BWS.

It is understood the original plan was for part of the business to be listed.

Out of its half-year earnings before interest and tax of $1.445bn, the Woolworths hotels division generated earnings of $161 million, down 1.5 per cent on the previous corresponding period.

But Mr Mathieson is believed to be eager to remain manager of the operation, which would likely prevent a sale of the business as a whole.

One of the big questions is what would happen to the Dan Murphy’s stores owned by ALH should Woolworths opt for a demerger of the ALH business.

Of its portfolio of 330 pubs, more than 50 are understood to have Dan Murphy’s liquor stores, which are seen as strategically important for the supermarket business.

Woolworths also owns Dan Murphy’s stores separate to ALH. Shares in Woolworths closed 37c higher at $33.12.