After a 98-day war, which exploded publicly on September 27 with the release of this notice of meeting, alcohol and pokies giant Endeavour Group last week struck a sensible peace agreement with its biggest shareholder, 80-year-old billionaire Bruce Mathieson.
Throughout the undignified war, Mathieson unloaded with all sorts of sledges ahead of the October 31 AGM with his wildest quotes breaching confidentiality being the following to The Australian:
“Yes he [Endeavour CEO Steve Donohue] asked if I would be interested in buying the pubs, and I told him no way. Let me put it this way, you’d never sell them, that is just a disgrace, that is just trying to hide how bad the business is. You don’t sell your best assets. This was about three weeks ago.”
“I’ve owned over 1,000 hotels over 40 years. I know how to build and run businesses in this industry. Peter Hearl [Endeavour chairman] once ran six KFCs and Colonel Sanders tells you how to run them. Steve Donohue has never built anything.”
While Bruce Mathieson Sr was throwing bombs, his son Bruce Jr remained on the board of Australia’s biggest liquor retailer and even had the temerity to spit the dummy about being excluded from an emergency Endeavour board meeting called to come up with a response to his father’s abuse. Once Bruce Mathieson Jr retired as CEO of Endeavour’s pubs division ALH (see this helpful timeline of Endeavour Group board and management changes) in June 2022, the family effectively lost management control of the world’s biggest non-casino pokies empire. They had put this together over the previous 30-plus years, bankrolled by Woolworths until it found the whole business so unseemly that it created Endeavour Group through a 2021 demerger.
So, when Victorian premier Dan Andrews announced his government’s sweeping pokies reform package last July, Endeavour CEO Steve Donohue came out and declared the company would implement the reduced trading hours in Victoria 10 months ahead of the mandated implementation date, which was July 1, 2024.
The Mathiesons were outraged by such responsible conduct, with Bruce Sr raging that it was costing the company millions to shut down its 80 Victorian pokies pubs from 4am until 10am every day, rather than “sweating the assets” for the maximum 20 hours a day with staggered closing times to effectively offer a 24-hour pokies service across Melbourne.
For all of Mathieson’s attack websites, colourful quotes, threats and proxy solicitation campaigns, these AGM voting outcomes proved that he didn’t have the numbers to prevail at his threatened extraordinary general meeting, given that his outside candidate Bill Wavish was only supported by 27.75% of voted stock.
The AGM itself was a bruising affair, with former Woolworths CEO Roger Corbett doing Mathieson’s bidding from the floor of the meeting and the board allowing some of these spicy questions to be lobbed directly at Bruce Mathieson Jr up on the stage.
In the end, the Mathiesons and Roger Corbett got their way with the chair’s scalp in last week’s peace deal, but only after they agreed to sacrifice Bruce Jr’s position on the board as part of a suicide pact with Peter Hearl, who did an excellent job at the AGM slapping down the Mathieson forces.
However, the win for both sides comes from the appointment of two highly regarded former CUB bosses to the board in Peter Margin and Ari Mervis, with Mervis taking over from Hearl as Endeavour chair by the end of April after a settling-in period. CUB is the largest supplier to Endeavour Group.
Once Hearl is safely out the door in April, Bruce Jr has agreed to go by no later than June 30. However, the Mathieson family are entitled to nominate a new director to represent their 15% stake. Crucially, the rest of the Endeavour board will have veto rights over that person.
This is how these independent Endeavour directors can ensure that no person called Mathieson ever serves on the board again — which is exactly how it should be after the appalling performance by both of them over the past few months.
The peace deal does little to undermine Endeavour CEO Steve Donohue, who the Mathiesons were also attacking. There is also no sign of a role for Mathieson’s AGM nominee Bill Wavish, who Hearl was mocking at the AGM for his disastrous chairmanship of Dick Smith before it collapsed.
As for a longer-term solution, it would make sense for the pokies-focused Mathiesons to take ownership and management control of Endeavour’s 300 pokies hotels, partially in exchange for cancelling their 15% stake which is today worth $1.4 billion. This would leave Endeavour focused on retail liquor through BWS and Dan Murphy’s, plus the non-gambling element of the pubs estate. The next largest Endeavour shareholders are Woolworths with 9% and Australian Super which owns 6.5% and has a strange penchant for heavily backing gambling stocks, including Aristocrat Leisure.
For some unclear reason, Bruce Sr was outraged when Donohue proposed that resolution during the public spat, using his proxy at the AGM to ask if such an approach was approved by the full board. This solution actually makes perfect sense and would mirror the structure that Coles used with private equity giant KKR in March 2019 to get Coles out of the toxic pokies business, while retaining access to the retail liquor sector.
As was explained in this Crikey piece last year, Mathieson also foolishly ploughed more than $220 million into ailing casino company Star Entertainment but has already lost almost two-thirds of his money after the stock plunged from his average buying price of around $1.30 to just 53c yesterday. This values his 161.67 million or 6.35% stake at only $86 million.
Like most gambling companies, Star happily discloses its specific pokies revenue, whereas Endeavour Group still refuses to reveal just how much gamblers are losing at their 300 pokies venues, even though the data is available for individual venues through regulators such as the Victorian Gambling and Casino Control Gambling Commission.
Removing all Mathiesons from Endeavour’s board and executive ranks and disclosing this data will leave what has historically been Australia’s biggest and most aggressive pokies operator in a better place to claim it adopts best practice governance and can transition to being a responsible gambling operator.
As one worker at Dan Murphy’s told me at the checkout over summer: “If we keep doing what Bruce Mathieson wants, the government will shut us down.”
It might not be that extreme, but after seeing what regulators in WA, Victoria, Queensland and NSW did to the Crown and Star Entertainment casino companies, Endeavour would be wise to clean up its act moving forward.
Reduced trading hours and an early embrace of fully cashless carded play would make a lot of sense to keep ahead of the regulatory curve.
