The expected Tabcorp-Tatts merger (first announced October 2016) faces a major challenge as a private consortium led by London private equity firm Macquarie Group and New York fund KKR has today launched an AUS $7.3 billion (£4.4 billion) bid for Tatts Group assets.
Under the proposition of ‘Pacific Consortium’ the group of investors has made an approach of between AUS $4.50-5 per Tatts share, with AUS $3.40 per share cash for the lotteries business alone. The rest will be paid in shares of Tatts’ betting operation, which the consortium intends to spin off from with group with a value at AUS $1 to A$1.60 a share.
That means if the approach is approved the consortium would split Tatts into two separate companies, forming an individual lotteries operator for Australia and either listing a new sports betting enterprise on the ASX or stripping the firm’s underperforming sports betting division.
At present Tatts governance has stated that it has yet to formally review the proposition put forward by the Pacific Consortium. Nevertheless Australian industry analysts have initially noted that the bid may offer Tatts investors better value than the Tabcorp merger.
Last October Tabcorp and Tatts declared that they had begun formal talks on a merger, which would seek to create the biggest Australian gambling enterprise, as the operators face increasing competition on home soil from international betting firms.
This morning Australian business news sources revealed that the consortium had first made contact with Tatts governance in early 2016, but no formal offer had been made.
The governance of Tabcorp, which will act as acquiring company should the merger be approved, has begun to review synergies between the two enterprises. There is also the fact that a Tabcorp/Tatts merger would also run into regulatory concerns around competition in the market.
Reacting to early takeover speculation, Australian business analysts have detailed that Pacific’s bid highlights the value of Tatts’ lucrative Australia lottery assets – presenting an interesting scenario which will likely divide investors on the company’s valuation.
Pacific Consortium Chairwoman Kerry Schott said in a statement the group had a record of long-term investment in assets that ‘deliver annuity-style returns similar to infrastructure assets’.