Tabcorp Acquires 10 Percent Stake in Tatts Ahead of Merger
Australian wagering giant, Tabcorp Holdings Limited, has acquired a 10 percent stake, worth up to $639.45 million, in rival Tatts Group as part of a strategic plan ahead of the planned $11.3 billion merger between the two companies.
On Friday, Tabcorp agreed to a cash-settled entity swap which some believe aims to protect its interests in the event that an interloper attempts to derail the agreed merger. The acquisition of the stake gives Tabcorp voting rights over 147 million Tatts Group shares.
“The transaction is intended to help facilitate the proposed combination of Tabcorp and Tatts and provide shareholders with improved financial outcomes,” read a term sheet sent from Tabcorp to investors. “The combination of Tabcorp and Tatts is expected to deliver significant value for both sets of shareholders, as well as material benefits to other shareholders including the racing industry, business partners, customers and governments.”
CLSA, an institutional investments and brokerage company, said that this appeared to be a “pre-emptive move rather than in response to an imminent bid or proposal.” This move will make it more difficult for Tatts shareholders to vote down the merger or for a third party to buy up stake.
Tabcorp and Tatts first discussed a merger in November 2015, but these talks were recently renewed and they announced last month that they expect the merger to be completed by the middle of next year, subject to approval from Tatts shareholders and regulators.
Under the terms of the merger agreement, Tatts shareholders would receive 0.8 Tabcorp shares as well as 42.5 cents per Tatts share they hold. The merger will result in the largest gambling company in Australia, combining TAB betting, lotteries, keno and gambling products and services, with combined revenue of more than $5 billion.
March 27, 2017