Woolworths has started the complicated three-part merge and de-merge of its Endeavour Drinks business with the issuing of an explanatory booklet for the first stage to shareholders yesterday.
The restructure is set to streamline Woolworths’ structure by reducing the number of subsidiaries and entities in the business and placing all Endeavour-related ones under one main entity.
First up the changes involves an internal reorganisation through which assets and liabilities relating to the Woolworths Drinks Business, as well as Woolworths’ 75% ownership interest in ALH, are transferred into a distinct legal entity within Woolworths Group to create Endeavour Group.
Following the Restructure, Woolworths will seek to complete the ALH Merger as step 2 of the process. Upon completion of the ALH Merger, Endeavour Group will be 85.4% owned by Woolworths and 14.6% owned by Bruce Mathieson Group. The ALH Merger does not require shareholder approval.
Following this, it is intended that the newly formed Endeavour Group will be separated from Woolworths Group by way of a demerger or other value accretive alternative.
That float or“value accretive alternative” is set to occur in the 2020 calendar year.
No further details about the eventual sale were provided.
But it should be noted that the Wesfarmers spin-off of its Coles supermarkets business late last year has gone well with the shares trading around record highs.
One-off costs of $108 million, along with $23 million already spent prior to the booklet being issued, have been flagged for the restructure scheme. Woolworths also flagged potential risks for the restructure, including potential contract renegotiation which may emerge from the renaming of the business.
In it, Woolworths urges shareholders to vote for the scheme at the company’s upcoming meeting on December 16, with chairman Gordon Cairns saying the first stage of the restructure would have no negative implications for shareholders.
“Importantly, the restructure scheme will not result in a change in the number of shares that you hold, cause any income tax consequences for you or negatively impact the ability of Woolworths to pay dividends,” he said.
Woolworths Group expects to mail the Restructure Booklet to shareholders on or about November 12. The retailer said it is anticipated the Restructure Scheme will be implemented early in 2020 (around February).
Woolies shares were up 0.13% at $37.71.