- »Tabcorp Publicly Acknowledges Break-up Talks
Tabcorp Publicly Acknowledges Break-up Talks
Australian wagering and entertainment company Tabcorp has confirmed it has received multiple offers to break up its business and there are reports it is under increased pressure to do so from key investors.
The Sydney Morning Herald reports that Tabcorp confirmed it had been approached about potential deals that would split its underperforming wagering business from its lucrative lotteries arm.
In response to media reports, the gambling giant published an ASX statement that said it had received “a number of unsolicited approaches and proposals” regarding its wagering and media business.
Tabcorp cautioned that the interest from multiple parties might not lead to a transaction taking place.
“The proposals were expressed to be confidential, indicative, non-binding and subject to numerous conditions including due diligence, financing and various regulatory approvals,” Tabcorp said.
“There is no certainty that any transaction will occur.
“The Tabcorp board is assessing the proposals and Tabcorp will update the market in due course,” it said.
Shares in the $9.1 billion firm rose 11.7 per cent to a near 12-month high of $4.58 on the news and closed up 8.78 per cent to $4.46.
Investors such as Perpetual, John Wylie’s Tanarra Capital and Investors Mutual were agitating for change last year, which led to the departure of chairwoman Paula Dwyer in December.
Tabcorp investor Sandon Capital has gone further by advocating for a split of the business to deliver value to investors.
“It validates our view that there is interest in the business and that market prices previously have not reflected anywhere near its true value,” Sandon Capital managing director Gabriel Radzyminski said.
“When we wrote to the company in November, we believed it was now the time to rethink our whole strategy, plus there was a change of chair,” he said.
“That effectively means it’s a new board because the dynamics change.
“It was an opportunity for a new board to start with a blank sheet of paper and say, right, here’s what we’ve got. But what should we be?”
Mr Radzyminski said Sandon’s proposal is a redux of its 2016 campaign at Tatts where Sandon argued the gaming group should split its wagering and lotteries business rather than merge with Tabcorp.
Sandon acquired shares in Tabcorp in 2020 and began agitating for change again.
“We’ve now had enough time to show that it just wasn’t going to work,” he said.
“The market was not reflecting the true value of the two businesses.
“Wagering still has problems that couldn’t be fixed, or, that weren’t being fixed, and it might be better if it were a pure-play wagering business.”
Tabcorp’s traditional wagering business, which was already struggling against online competition, had a tough year in 2020 with COVID-19.
Tabcorp was forced to raise $600 million last August to weather the pandemic storm and slash the value of its wagering business by $1 billion in its full-year accounts after it was hammered by the forced closure of pubs, clubs and betting shops and the suspension of sporting leagues.
It pushed the group to an $870 million annual loss for the 2020 financial year, compared with a $361 million profit in 2019.
Entain entertains Tabcorp purchase
The British owner of Ladbrokes, Entain, is reported to be in the early stages of a buyout of Australian bookmaker and gambling heavyweight Tabcorp.
Bloomberg reported in early February that Entain made a non-bind offer for the wagering and media division of Australia’s largest gambling company.
Discussions about a combination with Entain’s existing Australian business are at an early stage, the London-listed owner of the Ladbrokes betting chain said on Tuesday.
The offer could face competition as Tabcorp 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.