ACCC to rule on Woolies pub deal as buyers return

THE Australian Competition and Consumer Commission is due to reveal its finding on the proposed $500 million joint venture between the Laundy family and Woolworths today, which is tipped to get the green light.

By InvestSMART · 28 Jun 2012

By InvestSMART ·
28 Jun 2012

Comments

The deal, comprising 32 pubs across NSW, was due to be settled by the start of next week but over the past six months the ACCC has continued to request information, mainly from Woolworths.

If the ACCC allows the deal to go ahead, Woolworths will assume ownership of the pubs which include the Chittaway Tavern and Ocean Beach Hotel on the central coast and the Albion Park and the Charles Hotel near Wollongong.

In November 2010, retailer Gerry Harvey, also teamed up the Laundy family, John Singleton and developer Robert Whyte, to buy the Steyne Hotel in Manly. The high-profile consortium was understood to have paid about $27 million for the pub. It is still to be decided if the pub will be included in the Woolworths deal.

The deal has taken close to three years to complete and was successfully negotiated by Stuart Laundy, the son of founder Arthur.

The ACCC had concerns over the deal, which included the Caringbah Hotel, and the fact that Woolworths owns a majority of the ALH Group, which also owns a substantial number of pub leases across the country.

Woolworths and the Laundy Group jointly paid $40 million for the Caringbah Hotel in February this year through Andrew Jolliffe of Ray White Hotels Australia from the Bayfield family. The deal comes at a time when the pub industry continues to go through significant change.

It has been hit with new gaming tax rules, a tightening of smoking regulations and a swath of bad debts as new investors overpaid for pubs and were forced into receivership. However, more seasoned players have returned and deals are being completed at more realistic prices.

One of the most recent sales was by Sam Handy of Jones Lang LaSalle, who this week sold the Great Southern Hotel in Berry yesterday for $2.7 million to a private investor. He said demand was still strong for well-managed and well-located pubs.

Go to Google News, then click "Follow" button to add us.

Share this article and show your support

Frequently Asked Questions about this Article…

What is the $500 million Woolworths and Laundy family pub deal the ACCC is reviewing?

The deal is a proposed roughly $500 million joint venture between Woolworths and the Laundy family to acquire 32 pubs across New South Wales. The Australian Competition and Consumer Commission (ACCC) was due to reveal its finding on the proposal, which commentators were tipping was likely to get the green light. If approved, Woolworths would assume ownership of the pubs included in the transaction.

Why is the ACCC reviewing the Woolworths pub acquisition?

The ACCC reviewed the transaction to assess competition and market concentration concerns. Regulators requested additional information (mainly from Woolworths) because Woolworths already owns a majority of the ALH Group, which holds a substantial number of pub leases around Australia, and the deal could affect market dynamics.

Which specific pubs are named as part of the Woolworths-Laundy deal?

The article names several pubs that would be part of the proposed portfolio if the deal proceeds, including the Chittaway Tavern and Ocean Beach Hotel on the Central Coast, and the Albion Park and the Charles Hotel near Wollongong. The exact final list was subject to the completion process and regulator review.

Will the Steyne Hotel in Manly be included in the Woolworths pub purchase?

The Steyne Hotel was bought in 2010 by a high-profile consortium that included the Laundy family, Gerry Harvey, John Singleton and Robert Whyte for about $27 million. The article says it was still to be decided whether the Steyne would be included in the Woolworths-Laundy deal.

How long did it take to negotiate the Woolworths-Laundy pub deal and who led the negotiations?

The transaction took close to three years to complete and was successfully negotiated by Stuart Laundy, the son of founder Arthur Laundy.

What concerns did the ACCC have about specific pubs, like the Caringbah Hotel?

The ACCC’s concerns included certain assets such as the Caringbah Hotel and the broader issue that Woolworths’ ownership stake in ALH Group already gives it a substantial presence in pub leases nationally. Those factors prompted extra scrutiny of how the deal might affect competition.

What broader trends in the Australian pub industry should everyday investors know about?

The article highlights that the pub industry has faced headwinds from new gaming tax rules, tighter smoking regulations and some high-profile bad debts after inexperienced buyers overpaid for pubs and went into receivership. At the same time, more seasoned investors have returned and transactions are being completed at more realistic prices, with continued demand for well-managed, well-located pubs.

Are recent pub sales showing healthy demand and realistic pricing in the market?

Yes. The article cites a recent sale example: the Great Southern Hotel in Berry sold for $2.7 million to a private investor (handled by Sam Handy of Jones Lang LaSalle). It also notes Woolworths and the Laundy Group jointly paid $4 million for the Caringbah Hotel earlier in the year through Ray White Hotels Australia, signalling that sales are occurring at grounded, market-driven prices.