Tabbed Up: Entain Makes Improved $2.7 Billion Offer for Australian Bookmaker Tabcorp
British betting giant Entain, formerly GVC Holdings, has this week renewed its interest in acquiring Australian bookmaker Tabcorp with an AU$3.5 billion (US$2.7 billion) offer.
Ladbrokes and BetMGM operator Entain previously bid AU$3 billion ($2.324 billion) back in February.
Rumors and company insiders had suggested that Tabcorp’s initial rejection had led to Entain cooling on the idea. But it seems those reports were premature, as Entain has now upped its bid by some $400 million.
Half the Market
The sale is an interesting one because, as local media reports, Tabcorp’s online gambling division has been underperforming significantly over the last couple of years.
This is not to say that Australians don’t have an appetite for sports betting or online gambling. They’re just being outcompeted, mostly by Entain’s Ladbrokes brand.
But, as an example, even with declining revenues, Tabcorp still controls about 45% of the horse racing market in Australia.
If Entain were to purchase Tabcorp’s sports wagering business, it would add its existing 4% market share into the mix – giving it the priority position for nearly 50% of sports bets in Australia’s AU$24 billion ($18.6 billion) market.
However, such a deal could fall foul of the Australian Competition and Consumer Commission, as one entity would own so much of the market share.
If this deal goes forward, the company’s nearest competitor will be Flutter-owned SportsBet with 35% of the market.
Alternative Options
However, Tabcorp reportedly still considers an AU$3.5 billion bid to be slightly undervalued.
“This new bid for the sale of the wagering and media business will likely result in significant regulatory hurdles,” an analyst from well-known American investment bank JPMorgan told clients interested in the project, according to the Sydney Morning Herald.
“Barring any material premium, the board is likely to ignore repeat approaches,” the analyst finished.
Add in the potential for regulatory disapproval of the deal, and you can see why Tabcorp might be wary.
The company has other options on the table, too. Private equity firm Apollo Investments is also reportedly looking at Tabcorp’s online betting division.
Regular readers might recognize the name Apollo Investments as the company that unsuccessfully tried to pip Caesars to the post in a last-minute bid for UK operator William Hill before Caesars closed its own $3.7 billion deal just last week.
Will Apollo be more successful this time? For the moment, Tabcorp executives are staying tight-lipped about any other potential suitors
“The Tabcorp Board has not yet formed a view on the merits of the revised proposal and will assess it in the context of the previously announced strategic review”
“As stated, the objective of the strategic review is to assess and evaluate all structural and ownership options to maximize the value of Tabcorp’s businesses for the benefit of shareholders”
Company Statement
Another option in the mixing pot is a flotation of the company’s online gambling arm as a secondary company.
Meanwhile, Entain is confident that its revised all-cash bid will give “compelling value and certainty” to Tabcorp shareholders.
Whether the shareholders agree remains to be seen.
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