Apollo Global Management Offers $4 Billion For Tabcorp Businesses

Apollo Global Management is the latest company to put a bid in for Tabcorp's assets

Apollo Global Management is interested in acquiring two of Tabcorp’s businesses and is prepared to pay $4 billion. Apollo is one of three companies eyeing up Tabcorp’s Wagering & Media business but wants the Gaming Services business, too.

Tabcorp revealed Apollo’s offer on the Australian Securities Exchange. All publicly listed companies are bound by law to be transparent when it comes to possible takeovers.

“Tabcorp Holdings Limited (Tabcorp) announces that it has received a revised unsolicited, non-binding, and indicative proposal from Apollo Management on behalf of affiliated investment fund (Apollo). The revised proposal related to a possible acquisition by Apollo of Tabcorp’s Wagering & Media business and Gaming Services business for a combined value of $4 billion or alternatively Tabcorp’s Wagering & Media business for a value of $3.5 billion.”

The Tabcorp board is reviewing the offer and considering all possible outcomes.

“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. These options may include a potential sale of the Wagering & Media business to a third party or a potential demerger of either the Wagering & Media business or the Lotteries & Keno business.”

Apollo Faces Stiff Competition For Tabcorp Assets

Tabcorp is spoiled for choice when it comes to potential suitors for its Wagering & Media business. British gambling giant Entain Plc offered $3 billion for the division in March. Tabcorp rejected Entain’s bid because it said the bid undervalued the company. Entain has not tabled a second bid but suggested it is not out of the running just yet.

American company Fox Corporation is yet to lodge an official bid, but it is a matter of when not if one makes it into the public domain. Australia-born American mogul Rupert Murdoch owns Fox. His company successfully registered the FoxBet trademark in Australia in October 2020. Why would Fox do this if they did not have plans for expansion into the Aussie market?

Apollo is aggressively expanding and will not easily give up the chance to acquire Tabcorp’s assets.

It has spent almost $6 billion on gambling companies over the past couple of months. Apollo now owns International Game Technology (IGT), Great Canadian Gaming Corp, and forked out on the late Sheldon Adelson’s Venetian and Sands Convention Center in Las Vegas.

Apollo struck a $5 billion deal last week for a non-gambling business venture. The equity investment firm agreed to pay $5 billion in cash for 90% of Yahoo and AOL from Verizon Communications.

Tabcorp Has Massive Potential

Tabcorp is an Australian institution, one that makes a lot of money under normal operating circumstances. The company pays around $40 million per month in Keno and lottery taxes alone.

COVID-19 hit Tabcorp hard, like many gambling businesses around the world. Tabcorp’s board laid off 700 employees during the height of the pandemic, and its board of directors took substantial salary cuts.

The company wiped off $1 billion from its balance sheet in the form of goodwill. Profit fell 31% for the year ending June 30, 2020, although Tabcorp still recorded a net profit of $207 million for the half-year ending December 31, 2020.

Sports betting and horse racing is massive business in Australia. Aussies spend more than $24 billion every year, and Apollo wants a slice of the pie. Recent figures show every Aussie aged 18-49 spends, on average, $775 a month on sports betting. It is easy to see why the Aussie betting market is attracting global interest.

Tabcorp investors welcome the attention their company is receiving. Shares in Tabcorp rose 1.596% to $5.090 per share on the back of the Apollo news.