The Pacific Consortium has made a new offer to acquire betting and lotteries giant Tatts, according to The Australian.
While the reported offer values the business at $7.3 billion, the same price as a previous proposal, rejected by Tatts just before Christmas, this time it’s all cash, which means it will not be subject to unfavourable market fluctuations.
That might just be enough to turn Tatts’ shareholders’ heads and disrupt the accepted $11 billion merger with Tabcorp. In fact, some analysts believe that the onus is now on Tabcorp to come in for a big re-raise.
“This looks like it is clearly designed to get the board to give them due diligence,” Gabriel Radzyminski, managing director at Sandon Capital, a Tatts shareholder, told the Australian Financial Review. “We now have the beginning of a bidding war.”
Bidding War Ignited?
Tabcorp’s October cash and paper offer valued Tatts at $4.34 a share at the time, but it has shrunk to around $4.20 at current share prices. The merger is still awaiting clearance from the competitions regulator, while the Pacific Consortium’s proposal would not require such approval, since it does not involve the coming together of two betting superpowers.
Tatts swiftly rebuffed the original offer from the consortium, which includes private equity firm KKR, Macquarie, and the infrastructure arm of Morgan Stanley, denying the bid was superior to the Tabcorp deal and slamming the consortium’s valuation of its lottery business as “inadequate”.
“The board continues to believe that the proposed Tabcorp merger is in the best interests of Tatts shareholders and unanimously recommends [the merger] in the absence of a superior proposal,” it said in a statement to the ASX.
Tabcorp Finds Buyer for Queensland Pokie Op
The consortium has made no bones about the fact it is primarily interested in Tatts’ near-monopoly on the Australian lottery market, rather than its betting assets. The lottery sector is seen as a stable revenue stream and less volatile than the betting business. Should it be successful, it appears to be banking on Tabcorp still buying the betting business.
The news broke just hours after Tabcorp announced it had found a buyer for its Odyssey Gaming Services, a Queensland-based pokies monitoring operation, in an attempt to grease the skids on the merger.
The Queensland pokies sector was an area of concern flagged by the competitions regulator in a statement of issues published last month. Odyssey will be acquired by Australian National Hotels but only if the Tatts merger goes ahead.