Woolworths shareholders approve ALH & Endeavour Drinks merger

December 17, 2019
By Alana House

An overwhelmingly majority of investors have voted in favour of the $10billion merger of the Woolworths liquor and pubs businesses.

Votes lodged with the company before yesterday’s EGM showed 99.08% of shares were in favour with 81.28% of shareholders also in favour.

The move now requires approval by the Federal Court, which is expected to happen later this week.

Woolworths CEO Brad Banducci said: “We believe that this transaction is in the best interests of shareholders and will provide both businesses with greater focus, simplify both groups and enable Endeavour Group to pursue its growth strategy.”

Chairman Gordon Cairns said: “Woolworths Group intends to maintain approximately a 15% shareholding in the new group.

“What this proposal is not motivated by is Woolworths Group getting out of pokies and abandoning our commitment to the highest standards of responsible gaming. On the contrary, we are appointing a board and management, who believe and will commit to delivering on those standards.”

Woolworths will now move ahead with stage one of the restructure, which involves internal reorganisation of Woolworths Group to create a distinct legal entity, known as Endeavour Group and the facilitation of the ALH merger and potential separation. This is expected to be implemented on February 2, 2020.

“Once implemented, this means that our joint venture partner, BMG, will own a 14.6% stake in the newly formed Endeavour Group,” Banducci said.

“Our final stage will be the separation of Endeavour Group by way of demerger or other value accretive alternative. Any separation is currently expected to take place in calendar year 2020.

“I stress, that any separation remains uncertain and should a separation proceed, we currently intend to seek shareholder approval at an appropriate time in the future.”

Endeavour Drinks back on track

Banducci said the company had been accelerating innovation in its drinks business to better meet rapidly changing customer needs.

“While the financial performance of Endeavour Drinks in F19 was below our aspirations, we took a number of positive steps during the year driven by our ambition ‘to connect everyone with a Drinks experience they’ll love’ and are seeing positive signs of improvement,” he said.

“The biggest changes are happening at Dan Murphy’s with a refocus of the business on ‘Discovery’. Customer 1st Ranging, which has been very successful in BWS, is well underway within Dan’s. At year end, we had 35 wine merchants working in key Dan Murphy’s stores providing an authentic and exciting discovery experience for customers.

“EndeavourX was established during the year to ensure a consistent digital experience across Dan Murphy’s, BWS and other Endeavour Drinks businesses. Dan Murphy’s and BWS made good progress on providing increased convenience to customers during the year with the scale up of On Demand, the rollout of 30-minute pick up and further geographic expansion of Jimmy Brings.”

Dan Murphy’s has also introduced a new small format store to its network, at Elanora Heights in NSW that it describes as the ‘Store of the Future’. The Elanora Heights store was a conversion from a BWS and only has 400sqm of floor space, as opposed to the traditional 750sqm.

The store stocks only 2700 SKUs – almost half the 5000 SKUs at a typical Dan Murphy’s store – but all the products have received an online rating of four or above by customers.

Unique to this new format store is how the product offering has been curated through customer ratings, top selling lines and new or trending products or categories. Customers are able to browse the store and see ratings provided by Dan Murphy’s customers on the new electronic shelf labels.

“Price is great but the experience in the store and having the right range is as critical as price these days,” managing director Steve Donohue told The Australia Financial Review.

“That’s why we have curated the range in the four-star store in Elanora Heights.

“We’ve made [the range] more concise based on what customers tell us they love, what their favourites are,” he said. “Customers love the fact we are selling to them things they’ve told us they love through our digital platform.

“If it’s successful, it will give us an opportunity to get into spaces and places we wouldn’t otherwise be able to take Dan [Murphy’s].”

Endeavour is also working on making its larger Dan’s stores easier to navigate, with clearly labelled areas for fine wines, sparkling wines, spirits, ales and beer, and making it easier for customers to pick up online orders.

The first store under this new format opened in Hawthorn in Melbourne in December.

Dan Murphy’s is also developing a drive-through format that allows customers to order from their cars or pick up online orders without leaving their vehicles. The first drive-through opened in Innaloo in Perth.

Andy Sutton, Endeavour Group head of data and personalisation, also revealed earlier this month how the chain has adopted a Netflix style approach to marketing.  

New Chairman for Endeavour Group

Woolworths Group announced earlier this month that Peter Hearl, an experienced ASX 50 Director and global leader in the hospitality and food and beverage sector, was the proposed Chairman-elect of Endeavour Group.

Peter Hearl Woolworths Group Endevour Group Chairman

The appointment as Chairman was subject to completion of all relevant regulatory approvals and took effect when shareholders approved the Restructure Scheme resolution at the EGM.

Hearl’s international career has spanned several executive leadership roles within PepsiCo Restaurants International and YUM! Brands Incorporated, including Global Chief Operations Officer of Yum! and President of Pizza Hut.

He is currently a Non-Executive Director of Telstra Limited and Santos Limited, and was previously a Non-Executive Director of Treasury Wine Estates Ltd and Goodman Fielder Ltd.

Cairns said: “Peter is a globally experienced leader in the food and beverage sector and we are pleased to announce his appointment as Chairman-elect for the proposed Endeavour Group.”

Hearl added: “I’m looking forward to the opportunity of working with the team at Endeavour and in partnership with Woolworths as the Groups both look to embark on a new era of transformation following the Restructure and proposed demerger.”

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