Tabcorp Shareholders Vote In Favour of Demerger

Almost 99% of Tabcorp shareholders voted in favour of the demerger of its Wagering & Media business from its lottery and keno operations.

The anticipated demerger of Tabcorp Holdings’ lottery and keno businesses from the main entity is going ahead. Tabcorp shareholders voted on the demerger this week with 99% of votes in favour of the split.

The Tabcorp split forms two new companies; both are to be listed in the ASX by the end of May. New Tabcorp is the media and wagering company with The Lottery Corporation operating the keno and Tatts Lotto.

Tabcorp Chairman Steven Gregg welcomed the voting results.

“We are please to have received shareholder approval for the demerger of The Lottery Corporation from Tabcorp. This is an important milestone in repositioning the Group’s portfolio and setting up Tabcorp and The Lottery Corporation for future success.”

The company awaits approval from the Supreme Court of New South Wales. However, no issues are envisaged.

Investors reacted positively to the news, sending Tabcorp shares skywards. Shares in Tabcorp leapt almost 4% to $5.18 per share.

The Impact of the Tabcorp Demerger

The demerger creates two profitable gambling businesses for the group. Furthermore, those businesses have focused executive leadership teams, which allows both companies to thrive.

Tabcorp’s FY21 figures show Tabcorp generated $5.686 billion in revenue. Its EBITDA weighed in at $1.107 billion. Split the two new companies on a like-for-like basis and it is The Lottery Corporation that generates the most revenue. The Lottery Corporation generated $3.206 billion compared to New Tabcorp’s $2.493 billion. It is a similar story regarding EBITDA. The Lottery Corporation figures show $611 million with New Tabcorp chipping in with $464 million.

Gregg agreed to serve as Chairman for The Lottery Corporations, while Sue van der Merweto leads as Chief Executive. Bruce Akhurst chairs New Tabcorp, with Adam Rytenskild acting as Chief Executive. Akhurst and Rytenskild are streamlining the TAB wagering business, bringing into line to match online competitors.

Could New Tabcorp Sell Its Media and Wagering Business?

The demerger comes 14 months after much interest from companies wanting to purchase Tabcorp’s media and wagering division. Tabcorp hinted it was open to the possibility of selling for the right price.

British gambling giant Entain placed a $3 billion bid. Entain is the parent company of online poker site partypoker, Ladbrokes, and Coral, among others. Tabcorp rejected the approach in late May 2021, although it did not specifically mention Entain.

“Tabcorp Holdings Limited has previously announced that it has received several unsolicited approaches and proposals in relation to a potential transaction involving Tabcorp’s Wagering & Media business. These proposals valued the Wagering & Media business at circa $3 billion. The Tabcorp board has carefully considered the proposals and formed the view that the proposals do no adequately value Tabcorp’s Wagering & Media business. Tabcorp has consequently decided to undertake a strategic review to assess and evaluate all structural and ownership options to maximise the value of Tabcorp’s businesses for the benefit of shareholders.”

Entain was not the only company interested in Tabcorp’s Wagering & Media business because Apollo Global Management lodged a bid, too. The American investment arm offered $4 billion for the Wagering & Media division in addition to its Gaming Services business. Apollo was happy to pay $3.5 billion for the Wagering & Media business on its own. Tabcorp rejected both options.

The Changing Face of Australian Gambling

The upcoming demerger is the latest in a long line of changes in the Australian gambling industry. Sportsbet absorbed BetEasy following the Flutter Entertainment and The Stars Group merger in April 2020. In addition, Fox is looking to start its own sports betting business within the next couple of months.

Then there is the changing face of Crown Resorts and Star Entertainment. Crown accepted an $8.9 billion takeover offer from Blackstone Group, while Star needs sweeping changes to avoid losing its operating licence. The times they are a changing, as the great Bob Dylan once sang.