Pressure mounts on Woolworths to spin off ALH Group

Woolworths is feeling the heat to spin off its hotel and gaming business ALH Group.

Calls are mounting for the supermarket giant to follow Coles' lead, with its rival announcing it has inked a deal with KKR's Australian Venue Co to manage its Spirit Hotels group.

The new business, called Queensland Venue Co, sees Coles and AVC owning an equal number of shares. Coles will take the profits from the bottle shops and receive about $200 million cash as part of the deal, while AVC will take the profits from the hotels and gaming operations.

“Coles have done the right thing selling out to a KKR-controlled business called the Australian Venue Company which I hope will continue the Coles advocacy for the introduction of $1 maximum bets,” Tim Costello, a spokesman for the Alliance for Gambling Reform, told The Guardian.

“With Coles having successfully divested, the onus is now on Woolworths, Australia’s biggest and most ruthless pokies operator, to remove itself from the 12,000-plus pokies operated by Bruce Mathieson in the ALH joint venture, which is 75% owned by Woolworths.”

There has been pressure on both Coles and Woolworths from reform advocates and shareholders to divest their hotel arms amid negative coverage about poker machines.

ALH Group owns 12,000 poker machines across 330 pubs throughout Australia, making it the largest pokies business in Australia.

According to The Australian Financial Review, Woolworths and advisers Citi and UBS are believed to have been working for months on plans to spin off ALH into a separately listed company "to minimise the reputational damage from poker machines".