Tatts kills USD 5.5B Macquarie-led bid

Australian gambling company Tatts Group has rejected an offer worth up to USD 5.5B from a Macquarie-led consortium of investors, opting instead to proceed with a proposed merger with rival Tabcorp.

2016-12-23

Australia

Reading time 1:24 min

Australian gambling company Tatts Group has rejected an offer worth up to USD 5.5B from a Macquarie-led consortium of investors, opting instead to proceed with a proposed merger with rival Tabcorp.

Brisbane-based Tatts said in a statement on Friday that it had concluded that a mid-December offer put forward by a group of investors led by Australian investment bank Macquarie Group “is not a superior proposal, and cannot reasonably be expected to result in a superior proposal”.

On December 14, Pacific Consortium offered A$4.40 to A$5 per Tatts share, in cash and shares, in a move aimed at acquiring Tatts’ lucrative lotteries business and separating it from the wagering and gaming unit. Tatts generates most of its revenues from its lottery operations in Australia.

The consortium is composed of Macquarie, private equity group KKR, Morgan Stanley’s infrastructure division North Haven Infrastructure Partners and Australian superannuation fund First State.

In October, Melbourne-based Tabcorp — itself rumoured to be the object of takeover interest by the UK’s Ladbrokes Coral — tabled a A$4.34 per share offer, with the goal of creating a A$11.3bn gaming giant.

Rival bidders should talk about a break-up of the gaming group

Tatts said the Macquarie consortium’s indicative offer was based on a number of key assumptions — such as lottery earnings, current net debt and lottery license renewal — “that are either incorrect, inconsistent with Tatts’ current expectations or unknown”.

Even if the consortium were to revise its assumptions, Tatts said its board would still reject the offer from the group “given Tatts believes the total value offered is not superior to the proposed Tabcorp merger”.

Shares in Tatts shares fell 2.9 per cent to A$4.42 in Sydney, having initially shed as much as 4.4 per cent. Tabcorp gained 0.2 per cent to A$4.76 in a broader market that was down 0.3%.

Australians are among the world’s biggest gamblers, losing an average of $1,130 per person annually, according to H2 Gambling Capital, a UK consultancy.

That has caught the eye of international bookmakers such as Paddy Power, William Hill and Bet 365, competition that has posed fresh challenges for Tatts and Tabcorp.