Coles moved this week to divest itself of a direct connection with gaming in its hotel business, by agreeing to a joint venture partnership with Australian Venue Co. AVCo have purchased the management rights to 87 of Coles Spirit Hotels, while Coles retains the management operation of 10 liquor stores that are attached to the Spirit Hotels in South Australia and Western Australia.
From Coles perspective the hotels are worth around $300m revenue per year which is only a small proportion of the company’s overall earnings, but the AVCo $200m offer (10% less than book value) allows Coles to pay down debt and become more aggressive in the grocery wars.
AVCo will manage the 87 hotels in Queensland, with AVCo gaining all profits from the pub operations. They currently operate 60 pubs, including the iconic Sydney hotels Bungalow 8 and Cargo Bar. Under current Licencing laws in QLD, only hotels are allowed to run liquor stores. The terms of the JV sees Coles maintaining access to the liquor retail outlets.
Coles and AVC own equal shares in the JV and are jointly responsible for compliance