Woolworths Announces Demerger of Endeavour Group
- Woolworths shares open higher after announcing Endeavour Demerger.
- Investors will receive one Endeavor share for every two of Woolworths.
- Woolworths will pay almost $2 billion in special dividends.
Woolworths Group (ASX: WOW) has announced to ASX its intention to demerge Endeavour Group from Woolworths Core business. The Demerger, while was first discussed in June, but put on hold due to COVID-19, has today been approved by the company's board. The company believes the Demerger is a win arrangement where the companies will be able to operate independently yet still enjoy various benefits from their current relationship. Shares in Woolworths Group opened 1.35 per cent higher following the announcement.
Endeavour Group Owns and operates a broad portfolio of alcoholic drinks retailers, the most notable of which include Dan Murphy's, Cellar Masters and BWS. In particular, Dan Murphy's offers over 3,500 products in-store and 5,000 online with one of the widest variety of beverages worldwide. BWS operates 1,100 stores Australia wide, and this year will celebrate its 20th anniversary.' Across all its brands, Endeavour Group reported $10.3 billion in revenues in FY20.
Following the approval of the Demerger, Woolworths's shareholders will receive one share in Endeavor Group for every two shares held in Woolworths. Woolworths will also maintain a 14.6 per cent interest in the newly listed entity. The Demerger will also see the company pay between $1.6-2 billion in dividends.
The Demerger of Endeavour Group from Woolworths is planned to take place before the end of the 2021 Financial Year and has been unanimously approved by the company's board. Chairman of the Group Gordon Cairns commented how "The Woolworths Group Board believes that a demerger of Endeavour Group will enhance shareholder value and it will create two leading ASX-listed companies." Managing director of Endeavour Drinks, Steve Donohue, believes the company's "long-term prospects are strong. We have assembled an experienced and proven team, have a leading store network, digital presence, and market position."
Recently, Woolworths shares fell 3.86 per cent after releasing their first-quarter results to the market. The company saw a 0.4 per cent increase in Group sales to $16.5 billion assisted by strong sales from BIG W, Endeavour Drinks, and its Hotels. Woolworths also announced today this it would not go ahead with the development of a Dan Murphy's at Darwin Airport, which was announced on the 16th of December 2020.
Woolworths shares opened trading today at $39.95 per share and still 8.36 per cent below the company's all-time highs. Both Ord Minette and Macquarie see Woolworths's share price exceeding its all-time higher with target prices 12-13 per cent higher than current levels. Macquarie believes that the company has maintained its market share and expects them to outperform rival Coles in like-to-like sales.