Hong Kong-based alternative investments firm PAG has made a partial exit from pubs, bars and hotels business Australian Venue Co (AVC), selling a 45% stake to global firm CVC Capital Partners.
The deal was negotiated by CVC’s Sydney team with the investment made from the CVC Asia VI Private Equity Fund. No financial details have been disclosed. PAG retains an equal 45% stake with management holding the remaining 10% of AVC.
PAG acquired an 80% stake in AVC in 2023 from New York-based KKR. No investment figure was disclosed but it was estimated at $1.4 billion.
KKR invested in AVC in 2017 when it had a portfolio of 50 leasehold venues. During KKR’s investment term, that number was increased to more than 210 across Australia and New Zealand. A large part of that growth was achieved through a 2019 deal under which AVC took over operating 87 gaming hotels, mostly in Queensland, from Coles (ASX: COL).
The $200 million paid in that deal was significantly lower than would have been expected because Queensland liquor laws had prevented Coles from fully separating the bottle shops it wanted to retain from the licence-holding hotels it wanted to divest. As part of the deal, KKR had agreed to set up a joint venture with Coles to hold the licences.
AVC currently operates 243 licensed venues, primarily pubs, as well as some bars and licensed restaurants. CVC’s investment is planned to fuel a further round of growth for the business.
AVC chief executive Paul Waterson said: “The combination of CVC and PAG as owners will allow the company to meet its growth strategies to revamp existing premises and deliver better customer experiences while also funding new opportunities in major population centres.”
CVC Australia head Richard Blackburn said: “We have long admired AVC and viewed it as best in class both in terms of customer offering and operations. We’re excited to be partnering with a truly exceptional management team, and with PAG, to support the next phase of growth for AVC.”
PAG’s Australia-based managing director Sid Khotkar said the deal would benefit the two private equity firms and AVC.
“We work to invest in strong businesses in Australia to help make them even stronger,” he said. “This agreement is a testament to that approach and to AVC’s great success.”
PAG made its first investment in Australia in 2017 acquiring franchise chain The Cheesecake Shop. PAG exited that investment in 2022 to Melbourne investment firm River Capital.
PAG’s current Australian investments include: Cravable Brands, owner of quick service restaurant brands Red Rooster, Oporto, Chicken Treat, and Charcoal Charlies; poultry producer Cordina Farms; and the merged operations of Patties Foods and Vesco Foods, manufacturers of Four’N Twenty pies and Nanna’s baked products.
In January 2021, PAG provided a debt facility of $150 million via convertible notes to airline Regional Express (Rex) to support the company’s expansion into jet services on major capital city routes. When that strategy failed last year, Rex was placed in voluntary administration with a PAG entity as the largest creditor. The federal government then took on $50 million of the debt to PAG to enable Rex to continue providing regional services. The company remains in administration with a search for a new owner continuing. In June, the federal government committed to provide a further $30 million to keep services operating, at least until December.
Image: Diners at an Australian Venue Co restaurant.