Woolworths to Spin Off $1.4 Billion Property Group
Australia's top supermarket operator Woolworths said on Friday it plans to spin off 69 shopping centers into a$1.4 billion property group, which will raise up to A$506 million to partly fund the deal.
The move, which analysts at UBS estimate will release A$750 million in capital for Woolworths and could help it reduce debt, is designed to help it focus on its core retail business at a time when the industry faces rising competition from nimble online rivals.
It could also spell the end of Woolworths' efforts to acquire property - a relatively new strategy that it embarked on when it had a stronger balance sheet. Historically, it has preferred to enter into long term leases rather than holding property assets.
UBS saw a 0.7 percent addition to earnings if the money was used to cut debt.
Woolworths said it would create the SCA Property Group, a real estate investment trust, via a distribution to Woolworths shareholders and a related offer to investors.
The retailer will not get any shares in the property group and have no stake. All but one of the properties to be spun off have been developed or redeveloped by Woolworths and a group business is the anchor tenant for each property.
The financial impact was not expected to be material given the relatively small size of the property portfolio compared with Woolworths' total business, it said.
"We are focused on growing earnings from our core retail business. Reducing the capital invested in property will allow Woolworths to focus on other growth options," Chief Executive Grant Mr O'Brien said in a statement.
The company operates brands including discount retailer Big W, liquor chain Dan Murphy's and Masters Home Improvement in addition to its Woolworths supermarket chain which competes with Wesfarmers' Coles.
Woolworths said SCA Property Group is undertaking a public offer of 337.3 million stapled units to raise between $425 million and $506 million.
Woolworths shareholders will get one stapled unit in SCA Property Group for every five Woolworths shares that they hold on Nov. 30.
At 0033 GMT, Woolworths shares were up 1.3 percent at A$29.6 while the broader market was up 0.5 percent.
