Coles is offloading management of its 87 pubs in a $200 million deal with private equity-controlled Australian Venue Co.
The supermarket giant will set up a 50-50 joint venture with Melbourne-headquartered AVC, which is controlled by KKR & Co, to split the operation of its Spirit Hotels business.
Coles will continue to manage 243 retail liquor stores in Queensland and 10 more attached to Spirit Hotels in WA and SA, while AVC will pay $200 million for the management of the 87 hotels that comprise Coles’ hotel and gaming business.
‘The agreement with AVC will enable each party to bring relevant expertise to the joint venture,’ Coles chief executive Steven Cain said on Tuesday.
‘AVC has plans to grow the hotel portfolio in Queensland, which will in turn provide Coles with the opportunity to further grow its Retail Liquor business in that state.’
The structure of the deal is due to Queensland’s liquor and gaming laws, which mean bottle shop licensees must hold a commercial hotel licence for a pub within 10 kilometres.
All licences and authorities will be held by the newly created Queensland Venue Co joint venture.
The deal, which is expected to complete by June 30 subject to conditions including consent from some landlords, will result in an associated book loss of approximately $20 million.
AVC already operates more than 60 venues nationwide.
At 1020 AEDT, Coles shares had slipped 3.0 cents to $11.37, 9.1 per cent down on their November listing price of $12.49.