Investors had been pushing Woolworths to extricate itself from pokies and pubs for a while, arguing that these detract from its image as a wholesome supermarket business catering to Australian families. But shareholders will be surprised by the decision to get out of bottle shops - an area in which it has been very successful and has dominated its main rival, Coles. This will raise questions in some quarters about whether Woolworths is effectively throwing out the baby with the bathwater. Spaghetti junction

Woolworths argues that the pubs and liquor businesses are inextricably intertwined - they're what its chief executive, Brad Banducci, calls a spaghetti junction. On the one hand this renders separating them difficult, and on the other hand it makes them more valuable as a package. Loading (A little known fact is that 35 per cent of the BWS and Dan Murphy’s outlets are already owned by ALH, but operated by Woolworths). Banducci doesn’t deny that the negativity around owning poker machines factored into the decision - but he says it wasn’t a major factor. Shareholders would probably have been happier had Woolworths announced the sale of Big W - which has been losing money and struggling to recover.

But the immediate response to the news on Wednesday morning was strongly positive - bumping the share price up 3.22 per cent. Woolworths will start the process by merging its half-owned pub business ALH with its retail liquor business, Endeavour, to create a company that will be either sold or spun off. If sold, Woolworths would probably be looking at a price tag in excess of $11 billion. Going wholesome: Woolworths CEO Brad Banducci. Credit:Louie Douvis This would result in huge injection of capital for Woolworths - some of which could be invested back into the business and some given back to shareholders.

The demerger would result in all Woolworths shareholders receiving shares in the separately listed new LiquorCo. Given the size of the new business, it may be difficult to sell - particularly to another Australian company. Private equity would be considered the most likely potential buyer. One could imagine that Woolworths might have already put feelers to any potential buyers here and offshore. While Woolworths will lose the near $1 billion in earnings that these businesses contribute to its overall profit, it argues that the ability to focus on food and groceries will give it agility.