ustralia’s Tabcorp Holdings said on Monday it would demerge its Lotteries & Keno business into a listed entity, and it decided to reject offers of about A$3.5 billion (USD 2.6 B) for its TAB wagering unit from Entain, private equity giant Apollo, and wagering technology group BetMakers.
The demerger will create two listed-companies: Lotteries & KenoCo and Wagering & GamingCo, the latter being the target of the rejected buyout offers from those three firms. “The offers, at the end of the day, weren’t compelling enough,” Tabcorp chairman Steven Gregg said, as reported by The Sidney Morning Herald. “If they put more money on the table, that would help ... and if they are willing to take on risk on getting stakeholder approvals, that would help, rather than just putting it into our court to solve for them to get across the line.”
Tabcorp said it expected the demerger to be completed by the end of June 2022, with separation costs of as much as $275 million. CEO David Attenborough will leave the company after this time.
Credit rating agency S&P Global Ratings said it believed the demerger of Tabcorp’s lotteries arm would “materially reduce its earnings quality, scale, and diversification” and its wagering unit would be up against strong international competition, according to Reuters.
Entain said it was "disappointed" by Tabcorp's decision to go ahead with the demerger of its lotteries business. “We believe our all-cash offer would have delivered superior outcomes for shareholders, customers, employees and the wider industry,” Entain added.
In late March, Tabcorp undertook a review that looked at potentially spinning off either business or selling the W&M arm. The company said it considered proposals to sell the W&M business, and “concluded that a demerger of Lotteries & Keno is the optimal, and most certain, path to maximise the value of both businesses for Tabcorp shareholders”.
Tabcorp said selling the W&M arm, which was hit hard by the halt to sporting events and closure of betting shops due to the pandemic, would have involved several regulatory approvals that were uncertain and could take a long time. However, the company said it remained open to future engagement with bidders on revised proposals.
Gregg said that demerging and creating two ASX-listed companies with distinct profiles, strategies and growth opportunities would give shareholders certainty. “We know it will take 10 months,” he said. “We can get on with it.”
Tabcorp also said it was discussing joint-venture partnerships in international markets with one of the wagering arm’s suitors, Australian online bookmaking pioneer Matt Tripp’s BetMakers.
The company’s shares closed down 4.4% at A$4.97, their lowest in nearly three weeks.