Merger of gaming giants gets the green light

Tabcorp to complete Tatts deal in August

SYDNEY: An Australian regulator cleared Tabcorp Holdings Ltd’s proposed takeover of lottery owner Tatts Group Ltd for A$6.15 billion (US$4.67 billion), paving the way for a match-up that has fallen through twice before since 2006.

The deal between Tabcorp, Australia’s top horse racing and sports betting company, and Tatts would help create a domestic gambling powerhouse even as the challenge from overseas online rivals mounts.

Players such as Britain’s William Hill Plc and Ireland’s Paddy Power Plc have been making inroads since the deregulation of gambling licences in the country in 2012.

“The Australian Competition Tribunal (ACT) is satisfied that the proposed merger is likely to result in substantial public benefits,” its president, John Middleton, said in a written summary yesterday.

The ruling vindicates Tabcorp’s decision to bypass the usual arbiter of corporate buyouts, the Australian Competition and Consumer Commission (ACCC), and take its planned deal to the Federal Court’s ACT which usually acts as an appeal court.

The ACCC, which has previously blocked a deal between the companies on antitrust grounds, published in March a lengthy list of concerns about the proposed acquisition, although it made no ruling.

The buyout fell through a second time, in 2015, when the firms failed to come to an agreement.

ACT’s Middleton said he would publish his reasons for the decision in two days.

Tabcorp chief executive officer David Attenborough said he was very “pleased with the outcome”.

Shares of the company rose, although gains were capped by a full-year profit forecast that fell short of market expectations. They rose almost 6% to a two-month high of A$4.89, but pared gains later to trade up about 1%. The broader S&P/ASX 200 was down 0.7%.

Tatts shares rose almost 5% to A$4.37, after coming out of a halt in the afternoon, to trade at a 1% premium to Tabcorp’s cashand-scrip offer.

Only one condition was imposed on the proposed deal by ACT’s Middleton — that Tabcorp proceed with a planned sale of a gambling compliance business.

Tabcorp had earlier promised to sell that business, Odyssey Gaming Services, which generated A$12.6 million in revenue in fiscal 2016, to Australian National Hotels Pty Ltd to address antitrust worries.

It added that it was working with the ACCC to address other issues it raised, like the prospect of making it harder for rivals to buy licences to broadcast races in four states.

Tatts said in a statement that it would “continue to work with Tabcorp to progress the competition approval process and all other regulatory approvals required”.

Tabcorp aims to complete the Tatts deal in August.

The regulatory green light means the deal can now be put to shareholders for approval.

“The merger gives us an opportunity to see how the asset is run under Tabcorp ownership,” said Gabriel Radzyminski, managing director of Sandon Capital Investments Limited, which has shares in Tatts.

“We think, all things being equal, Tabcorp will do a better job than Tatts management (but) our operating thesis is that lotteries remain best off as a standalone asset.”

Tabcorp expects to take a one-off charge of A$34 million associated with the Tatts purchase this year.

It forecast a full-year profit at between A$173 million and A$180 million, short of an average forecast of A$192 million from 10 analysts polled by Thomson Reuters.