Tuesday, May 17, 2011

Pub deals

The AFR has reported that the Woolworths pub JV has approached the ACCC over a deal with the private Laundy Group to acquire 20 pubs in NSW currently held by Redcape (freeholds) and NLG (leaseholds) for $330 million. Redcape was formerly Hedley Leisure and Gaming with Tom's receivers still holding a majority stake. The receivers also hold a 20% stake in NLG. There is an exclusivity period on the proposal due to expire this week.

Redcape still holds a number of local pubs and bottle shops leased to Coles and also Hedz. The old Barrier Reef Hotel (Coles) is looking particulary shabby these days with limited opening hours. The most recent result earlier in the year from ING Entertainment Fund (IEF) wrote down the freehold value of the Courthouse Hotel from $6.1 to $5.6 million. Cost to date of the Courthouse to IEF since acquisition in 2006 is $11.5 million. A tragedy this heritage building was sold and turned into a pub.

There is a stark difference over rccent years between the performance of the comparable ALE (Woolies freehold pubs) and Redcape. ALE (ASX:LEP) raised capital and cut debt, while Redcape options were constrained by the Hedley holding and has been restricted to selling assets to cut debt. 

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