Wesfarmers in for a $400 million selling its pub business

Wesfarmers has flagged spinning off its Coles supermarket chain through a $19 billion demerger.

But it could go beyond that.

According to the Australian Financial Review, private equity group KKR is running the ruler over Wesfarmers’ pub business which could be worth as much as $400 million thanks mainly to its Queensland-based pub operations.

The AFR reports that phones at the Perth-based conglomerate have been ringing hot on the topic of its pubs business.

Under Queensland’s liquor licensing laws, anyone who owns a bottle shop has to hold a pub license.

KKR, which has snapped up Bruce Dixon’s pub group, now called The Australian Venue Company is keen to expand.

Wesfarmers management has expressed reservations about owning and operating poker machines at the 90 hotels it runs – similar to the situation now facing Woolworths which exposure to pubs and pokies through its investment in Australian Leisure and Hospitality.

The WA conglomerate inherited the hotels, in Queensland, NSW and Victoria, with its takeover of Coles in 2007.

However, it has never been comfortable with the business because of the reputational issues around pokies.

“We’re reluctant owners of that business, and it’s very rare that we would acknowledge that,” Wesfarmers chief executive Rob Scott said after the company posted its reults.

“We are reviewing our options there ... as we have done in the past,” he said under questioning, but added that “there’s a greater level of focus on that review, it would be fair to say.”

So Wesfarmers might be a willing seller.

The sticking point is that Wesfarmers’ pub leases, which are owned by Hotel Properties Investments Ltd.

Any deal would see Wesfarmers selling its pubs and lease liabilities to The Australian Venue Company as part of the deal with KKR.

Coles would then leases back the bottle shops that can be included in the spin-off.

Leon Getler 20th March 2018.