Following the completion of its “comprehensive strategic review,” Tabcorp Holdings plans to demerge its Lotteries & Keno and Wagering & Gaming operations with the goal of “creating two market leading companies.”
Tabcorp believes that the unit divestments, which have been approved by company Chairman Steven Gregg and the firm’s new board of directors, would provide Tabcorp investors with the long-awaited value in the ASX company’s assets.
Tabcorp governance stated in its report that shareholders will be able to evaluate each business separately, as well as benefit from any future domestic regulatory reform and worldwide expansion prospects in Wagering and Media.
Thorough and rigorous assessment
Gregg said: “Following a thorough and rigorous assessment of all relevant structural and ownership options, the Tabcorp Board of Directors has concluded that a demerger of the Lotteries and Keno business is the optimal and most certain path to maximise value for Tabcorp shareholders.
“The two businesses are expected to be leaders in their respective markets, creating great experiences for millions of customers. They will both build on their heritage of sharing the benefits of their commercial success with governments, the racing industry, licensed venues, newsagents and other retail and business partners.”
Tabcorp plans to complete the demerger by the end of June 2022, with David Attenborough serving as the company’s CEO and Managing Director until the new entities are founded.
‘Wagering & GamingCo’
Tabcorp’s Wagering and Media and Gaming Services will be combined into a new ‘Wagering & GamingCo’ division, which will be chaired by Bruce Akhurst and led by Adam Rytenskild as CEO.
The omni-channel wagering operator TAB, multi-venue, multi-channel racing and sports broadcaster Sky, gaming services provider MAX, and ‘well established, successful, and growing’ international operations in the US and Europe would all be covered by the new entity.
Australia’s leading lottery operator
The second company, Lotteries & KenoCo, will be known as “Australia’s leading lottery operator,” with licences in New South Wales, Victoria, Queensland, South Australia, and the Australian Capital Territory, as well as a digital licence. Gregg will serve as chairman, and Sue van der Merew will serve as CEO.
Tabcor anticipates both companies to have “strong balance sheets to support their growth,” since it has reached preliminary agreements with holders of its US Private Placement (USPP) notes, which will see these notes assigned to Lotteries & KenoCo as of the demerger date.
Both companies have set corporate objectives, with Wagering & GamingCo aiming for credit metrics commensurate with an investment grade credit profile, and Lotteries & KenoCo aiming for an investment grade credit rating with a strong BBB brand.
“Lotteries & KenoCo offer infrastructure-like qualities, low capital intensity, and upside from continuing digital growth,” Gregg added. ” It is underpinned by its scale, portfolio of exclusive and/or long-dated state licences and attractive financial profile.
“It has a track record of strong and resilient cash flow generation, driven by its well-balanced portfolio of games, growing digital sales penetration and extensive retail footprint. Wagering & GamingCo will have national scale and reach, organic growth options, and potential upside from any future domestic structural reform and further international expansion
“Wagering & Media has undergone a significant transformation and now has an omni-channel offering geared to create the best customer experience across all channels.
“Following the operational review of Gaming Services, which is being implemented, the business will continue as the largest gaming services provider in Australia with a simplified business model and streamlined operating cost base.”
Tabcorp’s governance study of strategic options included examining the possibility of selling its TAB wagering operation, which had sparked interest from large operators like as Entain and rival Australian firm BetMakers.
Bidding for Tabcorp
Tabcorp rejected Entain’s initial bid of AUS $3 billion (€2 billion) as “grossly undervaluing the TAB” subsidiary, causing the FTSE 100 company to up its offer to AUS $3.5 billion (€2.2 billion), a proposal that was neither confirmed nor rejected by the Australian company’s board of directors.
Meanwhile, BetMakers, an ASX-listed company, has made an offer of AUS 4 billion (€2.5 billion), claiming that their takeover would boost the finance of Australian racing while also benefiting customers.
Tabcorp’s board of directors looked over all of the alternatives for selling TAB and came to the conclusion that “a demerger of Lotteries & Keno is the optimal, and most certain, path to maximise the value of both businesses for Tabcorp shareholders”.
Despite rejecting TAB takeover overtures, Tabcorp’s board of directors stated that it would continue to engage with parties regarding any proposals that would provide sufficient value to the company’s shareholders.