We’re off to the races in the contest to see who will win ownership of Tabcorp’s wagering and media business. UK-based gaming giant Entain has just sprinted past a few others in the pack thanks to raising its offer price by half a billion dollars to $3.5 billion.
While there is a long way left to run, at this point Entain isn’t in the lead.
The board of Tabcorp is proving a tough nut to crack and is considered unlikely to even offer Entain the opportunity to take a look at the wagering and media division’s books.
Tabcorp is whipping those racing for ownership of its gaming division.Credit:AP
While Entain has the highest offer on the table, Tabcorp continues to pursue its own corporate break up – separating the wagering and media division from the lotteries and keno business.
This is tantamount to Tabcorp having its own horse in the race – and one that at this stage is out in front.
Tabcorp’s own strategy is to demerge its strongly performing lotteries and Keno business, leaving the underperforming wagering business as a standalone operation that would have a separate management and its own listing.
The Tabcorp board is betting that as a separate entity it will be worth more than the $3.5 billion Entain is offering.
The trouble for Entain and others that have publicly or privately run the ruler over Tabcorp’s wagering business is that they are competing against a demerger – which is effectively a silent bidder.
The board isn’t telling anyone what it thinks the wagering business could be worth once demerged.
But given the lukewarm response to Entain’s upgraded offer, Tabcorp chairman Steven Gregg thinks (or wants others to think) the demerger values it at more than $3.5 billion.
In doing so Gregg is playing a long game. He understands there is less risk associated with a demerger because it would avoid a plethora of approvals from state racing clubs and state regulators, the competition watchdog and the Foreign Investment Review Board.
Sure there are costs associated with a demerger but Tabcorp is touting the view that it remains a simpler process.
Having said that a large enough offer from Entain (or anyone else) would offset the risks.
At this point, only Entain and private equity outfit Apollo are the two outside groups to have shown their hands.
But Gregg will have a decent handle on who is out there sniffing around. Australia’s high-profile corporate bookie, Matthew Tripp, has been unofficially outed as keen to get a piece of the Tabcorp wagering action – potentially through engineering a merger with Betmakers in which he has a stake of about 5 per cent.
Lachlan Murdoch is also speculated to be involved or looking for a seat with a consortium eyeing an offer.
Tabcorp’s board is clearly thinking there are enough bidders in the room to kickstart a proper auction.
Gregg’s tactics appear to have won the support of a group of shareholders that have been strongly voicing their views to the board for at least a year. Indeed they are responsible for Gregg replacing the former chairman Paula Dwyer who was the architect of the merger of Tabcorp with Tatts Group in 2017 – a deal that has not yet delivered the performance improvements promised.
Ironically it is the poor performance of the wagering business since the merger that has provided the impetus for the move to decouple it from the lotteries business which has gone from strength to strength.
But as poorly performing as Tabcorp’s wagering business has been, its strategic appeal remains given its 37 per cent share of the Australian wagering market across digital and retail platforms.
The opportunity to improve its earnings lends to this appeal.
The media business that holds broadcast rights to horse racing in Australia is a smaller component of the division but is a valuable asset to other online betting outfits.
But Gregg’s decision to keep bidders hanging means they will need to further sharpen their pencils to get the inside running at the negotiating table.
Start the day with major stories, exclusive coverage and expert opinion from our leading business journalists delivered to your inbox. Sign up here.
Most Viewed in Business
From our partners
Source: Read Full Article