TWO of Australia’s betting powerhouses – Tabcorp and Tatts – have agreed to a merger which will create a $8.5 billion juggernaut which could potentially change the face of gambling in the country.
Tabcorp agreed in principal to purchase Australia’s leading lottery operator Tatts for $4.9 billion at $4.34 per share – which works out to be a 20.8 per cent premium – to ensure the deal went ahead.
The merger would mean that the company would have 90 percent of Australian totalisator pools.
The move comes after Australia’s de-regulation of gambling licensing laws back in 2012 provided Sportsbet – which is owned by Irish giants Paddy Power – and other companies such as William Hill the ability to gain a stronghold in the Australian betting marketplace.
The chairman of Tatts, Harry Boon, believes the merger will allow the prospective mega-company to compete alongside the burgeoning online market.
“The offshore bookmakers have been consolidating and have been penetrating our domestic market,” Mr Boon said.
“The merger of these two businesses creates a stronger platform for us to compete nationally and globally.”
Morgan Stanley analysts estimate that the two companies currently have 31 percent of the Australian online gambling market, which continues to grow despite the public turning their back on offline betting methods.
Tabcorp chairman Paula Dwyer said the deal will give them the ability to keep up in an ever-changing gaming landscape.
“The transaction we are announcing today will create a strong and diverse gambling business well placed to innovate, invest and compete in a rapidly evolving market,”
Both Boon and Dwyer are expected to maintain senior positions within the new company.
The deal currently looks to be a formality, but this is not the first time such a merger was mooted and not completed.
Back in 2006 a merger between Tabcorp and Tatts was blocked by the Australian Competition and Consumer Commission, but a statement released following the announcement of the proposed merger suggested the deal should go ahead.
“Our understanding is the proposed merger will require a public review that will examine a range of potential issues and areas of overlap, with the focus on various gaming and wagering services,” the Australian Competition and Consumer Commission said in a statement.
Pending approval from shareholders and the competition regulator, the deal should be completed by mid-2017.
Does the merger make for positive punter changes, or more false promises?
Astute punters may hold off rejoicing about the prospective merger, given betting company’s inability to cater to what they want, but the deal means the almost mythical national betting pool could be around the corner.
Tabcorp chairman Paula Dwyer alluded to a national pool in the company’s announcement of the deal.
“Combining our two complementary businesses will give us a national footprint and could create a pathway to larger wagering pools,” Dwyer said.
“We are excited by this opportunity, which we believe will deliver an enhanced wagering experience for our customers and, in turn, will generate stronger returns to the Australian racing industry.”
As it stands, the Western Australian tote pool would be the only remaining TAB outside of the mega-company’s control, given Tabcorp currently runs the Victorian and NSW TABs while Tatts operates the Queensland, South Australian, Tasmanian, ACT and Northern Territory incarnations.
The WA government currently owns the TAB license in the state but the incumbent government has indicated their willingness to sell, which if acquired would give the new company an Australian monopoly.
When these announcements are made it is easy to get excited as a punter who could likely benefit from such a deal, which would mean customers are not stiffed by a state getting a much higher dividend – the bane of every punter’s existence.
The merger to us calls for cautious optimism, but if a national tote pool comes into play punters have every reason to be jumping for joy.