Tabcorp strategic review
Keeping tabs: Tabcorp has announced a major restructuring which would see the lottery and keno business demerged from the wagering and gaming services arm, creating two new listed vehicles. The demerger comes after the company completed a strategic review aimed at unlocking shareholder value, looking at all options including a sale of the wagering business. The company has previously received two approaches from Entain and Apollo to buy the wagering arm, there was also an approach about a reverse takeover from Betmakers.
Tabcorp said today that there were various “complex” approvals that would have been needed were a sale of the wagering business to go ahead and that obtaining the necessary affirmative regulatory nods would have been uncertain.
Entain issued a statement to say it was “disappointed” its offer had not been taken up, adding that it would have delivered “superior outcomes for shareholders, customers, employees and the wider industry.”
Running the numbers: The company said the demerger would incur between A$225-A$275m in one-off separation costs and around A$40m-A$45m in ongoing incremental costs. Sue van der Merwe is set to head up the lottery and keno business while Adam Rytenskild is CEO-designate of the wagering arm. Pro-forma, the lottery and keno business would have had FY20 revenues of A$2.9bn and of $2.3bn in wagering and gaming revenues, with 90% of revenues coming from the wagering side (59% digital). The lottery side would have a gross debt/EBITDA ratio of between 3.4-4x while wagering and gaming would be between 1-1.5x. Tabcorp will update further when it releases it FY20 results on August 18.
Love unlimited: Tabcorp laid out what it sees as the case for the demerger, saying it meant the wagering and gaming business would be positioned to get the “full upside” from future regulatory reform in Australian and potential international expansion. The company said that notwithstanding the hurdles around a sale, the company would “remain open to future engagement with bidders.” This will include working with Betmakers on opportunities related to international horseracing. Betmakers said such discussions were in line with its plans to be a leading provider of B2B services to wagering operators.
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