Apollo Matches Entain’s Bid For Tabcorp

Bidding has heated up for a major Australian wagering and media business.

The Sydney Morning Herald reports that private equity outfit Apollo Global Management has matched UK outfit’s Entain’s $3.5 billion bid for the business.

Confirming Apollo as a suitor for the first time, Tabcorp said on Thursday afternoon that the New York-headquartered outfit had also put forward a second offer, valued at $4 billion, that would see it control Tabcorp’s poker machine servicing business as well.

The $11 billion listed gambling giant said Apollo’s second offer was conditional on due diligence, finance, approval from regulators and Tabcorp’s racing industry partners.

“The Tabcorp board has not yet formed a view on the merits of the revised proposal and will assert it in the context of the previously announced strategic review,” Tabcorp said.

Entain, which owns online bookmakers Ladbrokes and Neds in Australia, made a $3 billion offer for Tabcorp’s wagering arm last February, which was knocked back.

It then increased its bid to $3.5 billion in early May.

Interest from multiple parties prompted Tabcorp’s board to launch a strategic review into whether or not it should sell its embattled wagering and media business, or demerge the unit from its successful lotteries arm and list it as a separate company on the ASX.

Tabcorp’s investors have become increasingly frustrated with the company’s wagering performance, as it lost ground to online rivals.

Meanwhile, strong returns in its lotteries business has led to some investors pushing for a break up of the $11 billion merger between Tabcorp and Tatts in 2017.

Entain has not expressed any interest in Tabcorp’s pokies servicing business so far.

Murdoch interested in Tabcorp as Fox ramps up gambling interest

But the relatively small unit may sit more logically with wagering in a demerger situation, meaning Apollo’s secondary $4 billion offer for the wagering and the pokies businesses may gain more traction with Tabcorp’s board.

Media mogul Lachlan Murdoch has also expressed interest in Tabcorp’s wagering and media assets as his Fox Corporation looks to grow on the success of its Fox Bet operation in the US, while Australia’s online wagering pioneer Matthew Tripp has also positioned himself to be involved in a deal.

A major complication in any sale would be the new owner being able to renegotiate agreements Tabcorp has with state racing bodies, which get most of their funding through licences they issue to TAB.

Mr Gregg, Tabcorp’s chairman, said earlier this year that the certainty of any deal passing regulatory muster would be just as important in determining the future of the business, as the size of the bids it receives.

Tabcorp’s shares have risen steadily on the likelihood of a demerger or sale, increasing 28 per cent since January 1.

Any offer for Tabcorp could face competition as it said the business has received “a number of unsolicited approaches and proposals” in recent weeks.

Any deal would give Entain extra scale in the region.

Sports betting has become a busy area for mergers globally as the industry transitions online and US states legalise wagers.

Last month, Entain rejected an $11 billion takeover approach from US casino operator MGM Resorts International.

Wagering and media is Tabcorp’s biggest division after the lotteries and keno business.

In the year to June 2020, wagering and media generated 40 per cent of its A$5.22 billion in revenue, company filings show.