Tabcorp takeover preferred to demerger
A takeover bid by a UK-based gaming and wagering giant of an Australian gambling powerhouse is preferred to a demerger of the business, financial analysts have said.
The Australian Financial Review reports that Citi analysts have run their eyes across UK-based Entain’s revised off for Tabcorp’s bookmaking and media unit and said that if all necessary industry and regulatory approvals are received, a takeover would be superior to a demerger for shareholders.
“A demerger would add time and cost to the process, with no guarantee that a demerged wagering business would trade at a premium to this offer,” analysts said.
Citi said a demerger could take up to 12 months to implement and see Tabcorp incur significant costs, including advisers and renegotiating its US private placement debt.
The comments come after Entain increased its indicative bid for Tabcorp’s wagering and media business to $3.5 billion from $3 billion.
It was subject to conditions including due diligence, securing finance and regulatory approvals.
Citi said the revised offer valued the unit at nine-times EBITDA and 23-times profit on a price-to-earnings basis.
“In our view, the threat of a demerger has achieved its desired result of increasing the bid price of wagering,” Citi said.
“While Tabcorp’s board has not yet formed a view on the merits of the revised bid, the incremental upside from progressing the strategic review towards a demerger are now lower than the risks and incremental costs of a demerger, in our view.”
Despite Entain’s increased bid, Tabcorp said it will proceed with its strategic review that it outlined would occur in April.
Tabcorp launches strategic review to assess takeover bids
Tabcorp’s board is yet to admit Entain to its data room as some shareholders and analysts said the revised bid is enough to allow due diligence, but others back the board’s slower pace and insist on a strategic review.
Entain, which owns bookmaker Ladbokes, Sportingbet and a host of other gambling brands, believes it should get due diligence.
Its view was supposed by Evans & Partners analyst Sacha Krien, who said the $3.5 billion bid was above his valuation for the wagering unit of $3.4 billion.
Mr Krein said: “We believe the revised bid should be enough to get Entain in the door for due diligence; the fact Tabcorp has released details of the bid this time suggests it will be seriously considered.”
After rejecting Entain’s initial $3 billion bid, Tabcorp chairman Steven Gregg put the wagering and media business in play by launching the strategic review.
The review is looking at three options: the sale of the wagering business, a demerger of the wagering business or a demerger of Tabcorp’s prized lotteries business.
Investors including Perpetual, Investors Mutual and Tanarra Capital have been campaigning for more than 18 months for Tabcorp to consider splitting its wagering and lotteries businesses into separate companies.
Tabcorp has told the Australian Securities Exchange it had not yet formed a view on the revised proposal and would assess it in the context of the strategic review.
“As stated, the objective of the strategic review is to assess and evaluate all structural and ownership options to maximise the value of Tabcorp’s businesses for the benefit of shareholders.”
Apollo Global Management also lobbed a $3 billion bid in February and bookie Matthew Tripp might make a tilt at the business after hiring Goldman Sachs for advice.
Mr Tripp has some big backers, including the Murdoch family, which is seeking an entry into Australia’s $4.7 billion-a-year betting market, a number of fund managers and the goodwill of the racing industry.