As part of the demerger, which investors will vote on in early June, Woolworths will look to return between $1.6 billion and $2 billion to shareholders by way of a special dividend. This news was welcomed by investors, with Woolworths shares gaining 2.7 per cent on Monday.
Angus Gluskie, managing director at Woolworths shareholder White Funds, said the move to divest the pokies-linked Endeavour would be a good move for the supermarket from an environmental, social, and corporate governance (ESG) perspective.
What this allows is the investors that are comfortable with the the ethical or moral elements to align themselves to [Endeavour]. That in many ways, is better than forcing investors to make a mixed choice, he said
It seems cleaner, and it gives people the opportunity to make their own personal decisions.
Anton du Preez, fund manager at Pengana Capital, agreed, with the shareholder expecting Woolworths would benefit from a re-rating from an ESG point of view as investors who were previously unable to invest in the stock buy shares.
Shareholders will receive one share in Endeavour for every one Woolworths share they own, with the division reporting $10.3 billion in revenue last financial year. The companys board has unanimously voted in favour of the demerger.
Endeavour Drinks managing director Steve Donohue.Credit:Eamon Gallagher
Woolworths first announced it was exploring its options for a demerger or other sale of Endeavour in June 2019, and quickly got underway with restructuring the business in preparation. However, the process was put on hold due to COVID-19 before being restarted again this year.
Following the split, Woolworths will hold a 14.6 per cent interest in the new Endeavour Group alongside billionaire hotelier Bruce Mathieson due to his former 25 per cent stake in the companys ALH hotels division.
The move is reminiscent of Wesfarmers demerger of Coles in 2018. However, Mr Banducci noted he intended to be a longer-term shareholder in Endeavour, unlike Wesfarmers which sold two tranches of Coles shares in 2020.
Mr Mathieson will sit on Endeavours board alongside current Woolworths director Holy Kramer, former Lion managing director Duncan Makeig, former Telstra CMO Joe Pollard, Woolworths executive Colin Storrie, and Nine Entertainment director Catherine West. They will be joined by Endeavours chairman Peter Hearl and Mr Donohue.
Endeavour intends to pay a dividend of 70 to 75 per cent of net profit after tax for the second half of the 2021 financial year and will cement that as its long-term payout ratio. It expects to frank its dividends to the maximum extent possible, with the business currently sitting on $600 million in franking credits.
We believe that Endeavour Groups long-term prospects are strong. We have assembled an experienced and proven team, have a leading store network, digital presence, and market position, Mr Donohue said.
Through living our purpose of creating a more sociable future together we see many opportunities to grow the business and create value for our shareholders.
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