Woolworth’s (WOW) look to split liquor, hotels from food

Stock

Woolworths (WOW) $33.85 as at 03/07/2019

Event

Shares in Woolworths have rallied today as the group looks to divest the hotels, gaming and liquor businesses. Woolies will combine the Endeavour Drinks and ALH Group into Endeavour before separating the businesses next year. A demerger has been touted if Woolworths don’t receive a competitive offer to sell what will become Australia’s biggest hospitality business.

The move has been long rumoured with many in the market particularly keen on seeing the pokies business moved off the groups books, seen as a stain on the ethical standards of the company. Today’s move in the share price does show how keen investors are to have pure exposure to the hospitality side of the business with WOW shares rallying nearly 4% to the intraday high. With revenue of $10bn at 10% EBITDA margins, it’s easy to see why. The group will run 327 hotels with over 12,000 pokie licences, and over 1,500 liquor stores,

The end result will see Woolworth’s become a pure food and supermarket play in the hopes of becoming more streamlined and focussed as it tries to retain the ascendency over Coles and new competitors in the space.

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