Pub giant Endeavor’s $11million deal in Darwin is under intense competitive scrutiny
The ACCC letter also states that Endeavor already owns the airport tavern in Darwin which is also within a 5km radius of the seaside tavern. Endeavor also owns the Parap tavern which is in a radius of 10 km.
In liquor retail, Endeavor operates BWS Nightcliff, BWS Casuarina, BWS Airport Tavern Drive and BWS Leanyer within a 5km radius.
The ACCC investigation examines the extent to which Endeavor’s hotels and bottle stores compete with the Beachfront Hotel and whether increasing Endeavor’s size would affect the acquisition of liquor products at the wholesale level .
Endeavor signed a deal in May to acquire the Beachfront Hotel for around $11 million from longtime owner Doug Sallis. The Great Hall overlooks Nightcliff Beach in Rapid Creek, just north of Darwin’s central business district, and generates annual revenue of over $10 million from its food, drink, games and bottle shop at the flying.
Endeavor’s 340 hotels operate more than 12,400 poker machines at the venues. It split from former parent Woolworths in 2021, but Woolworths retained a 14.6% stake. The Mathieson family owns a 15.1% stake in Endeavor Group.
Woolworths wanted to distance itself from the ESG constraints of owning a large slots company.
A spokesperson for Endeavor said the group “has a long track record of working constructively with regulators.”
“The acquisition of the Beachfront Hotel is subject to all necessary regulatory approvals, including from the ACCC, and Endeavor will continue to work constructively with the ACCC in its review,” the spokesperson said.
UBS analyst Shaun Cousins issued a ‘sell’ recommendation on Endeavour, saying that while it has been a strong share price player since the Woolworths split, the price-earnings multiple was now too high. There were also tougher times ahead, as increases in the cost of living curb household spending and likely lead to lower spending at the band’s pubs.
Mr Cousins has a 12-month price target of $7.20 on the stock and made the sell recommendation due to a “deteriorating risk and reward” situation for the investor.
He also said growth on the gaming side of the business is likely to be weaker, while the shift to “premiumization” in liquor retail is expected to slow with pressures on discretionary spending. The trend towards premiumization in liquor retailing, where consumers buy beer, wine and spirits at higher prices but drink less of them, has been evident in recent years across the sector.
Mr Cousins said rising labor costs were also a drag on profits. On June 20, Endeavor announced it would advance pay rises of between 4.6% and 5.2% three months to July 1 for around 15,000 workers at its pubs and clubs in an attempt to address the a shortage of personnel in the company.