Woolworths shares outperform on $468m Endeavour selldown and capital return

Woolies plans to return capital to shareholders following the sale.

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Woolworths Group Ltd (ASX: WOW) shares are faring better than most on Wednesday morning.

At the time of writing, the supermarket giant's shares are up a fraction to $31.93.

What's going on with Woolworths shares today?

The company's shares are outperforming today after the release of an announcement offset a broad market sell-off.

In respect to the latter, the ASX 200 index is currently down 1.3% following a very poor night of trade on Wall Street. Investors were hitting the sell button after bond yields widened in response to rate cut pessimism.

As for the former, this morning Woolworths announced that it has sold down its stake in alcoholic drinks giant Endeavour Group Ltd (ASX: EDV).

According to the release, Woolworths has agreed to sell 5% of the issued capital of Endeavour Group via a block trade at a price of $5.22 per share. This represents a modest 2.6% discount to where the Dan Murphy's owner's shares ended yesterday's session.

This small discount could be seen as a positive for both Woolworths and Endeavour Group shareholders in the current environment and could be seen as a sign that a large investor leapt at the chance to get in at current levels.

Following the sale, Woolworths' shareholding in Endeavour Group will be approximately 4.1%. It has committed to retain its remaining shares for a period of at least 60 calendar days, subject to customary exceptions.

It also confirmed that it "does not possess any information that is not generally available that a reasonable person would expect to have a material effect on the price or value of Endeavour Group securities."

The release reveals that the sale generated proceeds of $468 million for Woolworths.

Where is this money going?

The good news for Woolworths shareholders is that the proceeds from the sale could soon be landing in their pockets.

Woolworths advised that it intends to use the proceeds to return capital to shareholders and will provide an update with its full-year results in August.

Commenting on the sell down, Woolworths Group's outgoing CEO, Brad Banducci, said:

While Woolworths Group and Endeavour Group remain important business partners, with a number of long term partnership agreements in place, we no longer believe that a material equity investment in Endeavour Group is required as Endeavour Group approaches its three-year anniversary as an independent listed company.

As a result, we have decided to reduce our stake below 5% with the intention to use the proceeds to return capital to shareholders. We currently have no intention to sell the remaining stake, but will continue to assess what we believe is in the best interests of Woolworths Group shareholders.

Endeavour shares are down 4% in early trade.

Motley Fool contributor James Mickleboro has positions in Endeavour Group. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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