Pubs sector prepares for shake-up
Australia’s pub sector may be in line for another major shake-up as Woolworths’ hospitality arm, ALH Group, and Charter Hall Group, mull a $650 million-plus bid for Redcape Hotel Group.
News of the potential deal comes as the pub owner and operator weighs a $500m initial public offering as its hedge fund owners, York and Varde, seek out the most profitable exit.
UBS and JPMorgan are on the float ticket and, while sources said this remained the preferred option, fund managers will seek a discount to comparable gaming stocks such as Crown, Tabcorp and Echo Entertainment.
Several investors have already indicated that the valuation should be set at 13-15 times forward net profit, rather than the 15.4-17.5-times range calculated by JPMorgan’s research analysts.
The more sober assessment predates the recent volatility in global stockmarkets.
While fund managers may be cheered by a recent 10-15 per cent uplift in the valuation of the portfolio, which consists of 24 pubs in NSW, the markets may not have the appetite of existing players.
Few also would be able to milk the assets like Woolworths, which can build a Dan Murphy’s liquor store next to the pubs and extract $1m-$2m in additional earnings.
Charter Hall also boasts large reserves. Super fund Hostplus backed the property group’s foray into the pub sector last year with the acquisition of a $603m portfolio of ALH-anchored hotels.
The addition of the Redcape portfolio, run by ALH, would transform Charter Hall into one of the most significant pub landlords in the nation and opens the possibility of a large IPO further down the track.
This article first appeared in The Australian Business Review.
Source: Data Room / The Australian, Bridget Carter & Gretchen Friemann, 1st September 2015
Originally published as: Pubs sector prepares for shake-up
