Two Australian betting companies Tabcorp Holdings Ltd. and Tatts Group Ltd have agreed to a merger of equals wherein Tabcorp will be acquiring Tatts for A$6.4 billion ($4.9 billion).
The merger will create a pan-Australian betting company that will be able to handle increasing competition from international operators like Ladbrokes and the Bet365 Group. Tatts shareholders will be receiving A$4.34 cash per share as well as a Tabcorp stock, which translates into a premium 21 percent over Tatts’ latest closing share price. The amalgamation of operations is expected to offer annual savings of at least A$130 million according to the companies.
This merger is also expected to boost the ability of the Australian players to counter the threat from overseas companies according to market experts. Rising competition from international companies like William Hill Plc, Bet365 and Ladbrokes Plc has made it tougher for Australian companies in recent years.
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In a statement, Evan Lucas, a market strategist at spread-betting giant IG said,
It had to happen to take on the foreign raiders. To merge to form a balance sheet with the synergies that would come from a deal like this makes complete sense
The new entity will offer betting services across sports matches, greyhound racing and horse racing. The company will be in possession of licenses with validity through the next century and will have operations in all key Australian states including New South Wales. Tatts’ biggest shareholder Perpetual Ltd had expressed support for the merger. Paul Skamvougeras, head of equities at Perpetual said that the synergies from the deal were substantial adding that furthermore the terms of the merger were advantageous to Tatts shareholders.
The merger might however run into antitrust issues. The head of the Australian Competitionand Consumer Commission Rod Sims stated that the two companies have similar services which overlapped and hence the deal raises serious concerns. Sims has indicated that the Commission would be examining the deal to see if the current level of competition in the industry would be capable of handling such a large operation.
Tabcorp Chairman Paula Dwyer said that the deal would provide the two companies with a national footprint and will help in generating larger wagering pools. Tatts offers horse racing and sports wagering in three states – Queensland, Tasmania and South Australia while Tabcorp has rights to similar operations in Victoria and New South Wales. Tatts additionally operates a lotteries business.
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