Today, Woolworths Group Limited [ASX:WOW] announced an agreement to merge Endeavour Drinks and ALH Group [ASX:AKH] into a combined entity, set to be named ‘Endeavour Group Limited’.
At time of writing, Woolworths’ share price is trading at $33.83, up 2.78%.
Endeavour Drinks and ALH Group merger details
According to Woolworths, the merger will build an ‘integrated drinks and hospitality business with ~$10bn of sales, ~$1bn of EBITDA and a mandate for investment.’
This will be executed through a restructure, to be voted on at this year’s Annual General Meeting (AGM).
After the merger, Woolworths will break off through either a demerger or a value-accretive alternative, to foster growth in both groups.
The ongoing service agreement will be an ongoing benefit of the partnership.
The merger will be executed through a restructure, to be voted on at this year’s AGM, with the separation set for 2020.
In recent years, the retailer has been under pressure to move away from its pubs and poker machines businesses after coming under scrutiny from liquor licensing authorities.
This is why we are seeing Woolworths take steps to distance itself from the soon-to-be Endeavour Group Limited.
This will allow Woolworths to have a more streamlined operating model focussed on the core everyday needs of the public.
This means a big emphasis on convenience and expansion for Woolworths Group.
Woolworths’ share price 2019 outlook
Woolworths has set a big task, expanding what it describes as the ‘food and everyday needs retail ecosystem.’
Its growth is set to come through supply chain development as well as harnessing digital marketing platforms.
Shareholders will be pleased to know that the overarching purpose is to maximise shareholder value.
Regards,
Ryan Clarkson-Ledward,
For Money Morning
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