Woolworths share price: Where next as Demerger looms?
The Woolworths share price has drifted higher as the company closes in on demerging its drinks and hotels businesses.
Woolworths (ticker: WOW) on Monday announced that it had entered the third and final stage of its Endeavour Drinks transformation program.
Today’s announcement builds on a process started back in 2019, which started with the group’s drinks and hospitality businesses restructured to its own legal entity: Endeavour Group. The aim behind the demerger was always a simple one: Create a more focused, independent business that was/ will be well positioned for future growth.
In business terms, Woolworth’s Board believes this decision is ‘the most value accretive path to separation for Shareholders.'
Where next for shareholders?
Woolworths management noted that shareholders currently do not need to take any action bar potentially considering the just-released documentation associated with the demerger.
Moving forward, the Board said it 'recommends unanimously that you [the shareholder] vote in favour of the Meetings Resolutions' related to the demerger, set to be discussed at the upcoming general meeting.
Ultimately, the demerger will not impact the number of Woolworths shares that investors hold in the company. 'Shareholders will retain all Woolworths Shares they own at the Demerger Record date.'
Eligible Woolworths shareholders will however receive one Endeavour Group share for every Woolworths share held on the demerger date.
The formal separation of Woolworths and Endeavour is set to take place on 28 June, with the final steps of the process anticipated to be complete by 1 July.
Covid placed significant impact on Woolworths’ hotels business, with lockdowns and closures eating into earnings in 2020.
Despite that, the Endeavour Group continued to operate at a significant scale, with the company reporting FY20 pro-forma revenues of $10.6 billion. Earnings (EBIT) were $693 million, while the company also boasts 5.1 million My Dan members.
Looking at the Group’s physical footprint, there are 246 Dan Murphy's stores across Australia, 1,284 BWS stores, and 332 hotel venues.
In terms of market capitalisation, management expects Endeavour to be within the top 50 ASX-listed companies following the spin-off.
Woolworths will maintain a 14.6% stake in Endeavour, following the demerger, though the stake will be non-controlling.
Woolworths Share Price
The market responded positively to the demerger update, with the Woolworths share price up over 2% within the first hour of trade, last trading just above the $40 handle. The broader market was also up, with the ASX 200 gaining over 1% before noon.
This caps off a stable period for the blue-chip, with WOW up around 7% in the last six months.
Trade ASX-listed stocks long and short with IG today
Create an IG account or log in to your existing account to get started now.
This information has been prepared by IG, a trading name of IG Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.
CFDs are a leveraged products. CFD trading may not be suitable for everyone and can result in losses that exceed your initial deposit, so please ensure that you fully understand the risks involved.
Live prices on most popular markets