Entain Plc Weighs Up Buying Tabcorp’s TAB Business

Ladbrokes owner Entain have bid for the Wagering and Media division of Tabcorp

British gambling firm Entain is in the early stages of buying out Australian gambling giant Tabcorp. Entain Plc, formerly known as GVC Holdings until recently, released a statement to the London Stock Exchange in the light of media speculation. It named the Wagering and Media division specifically.

“Entain Plc, the global sports betting and gaming group, notes the recent press speculation regarding a possible transaction involving Tabcorp Holdings Limited in Australia and confirm that it has made a non-binding indicative offer to acquire its Wagering and Media business.”

“Whilst discussion are at an early stage, any transaction would be in-line with Entain’s current M&A strategy of expanding across regulated international markets. As such, this would prevent an opportunity to acquire an attractive business which, if combined with Entain’s existing Australian business, would create a leading, integrated multi-channel and multi-brand wagering company.”

Wagering and Media is Tabcorp’s biggest division behind its Lotteries and Keno business. Recent company filings show Wagering and Media generate some 40% of Tabcorp’s $5.22 billion revenue. Consequently, the division is profitable for the Aussie gambling giant.

A deal at the right price has positives, on the whole, Goodbody analyst David Brohan said.

“Given the consolidated nature of the Australian market, there are limited such opportunities left to look at. Assuming any deal is completed at the right price we can see positives from a transaction.”

Shares in Tabcorp surged 9% on the back of the news valuing the company at $9.9 billion. The Wagering and Media division, however, makes up around $3 billion of that value.

Entain Face a Battle In Tabcorp Takeover

This news broke after the Australian Financial Review reported Tanarra Capital wants to break up Tabcorp. Tanarra Capital is a Melbourne-based private equity fund led by John Wylie. Wylie has, occasionally, called for Tabcorp to be broken up, starting unofficial bidding wars.

Entain is the latest stellar name to throw its hat into the ring in an official capacity. US private equity funds Blackstone and Morgan Stanley Infrastructure Partners are two other potential suitors.

Blackstone is particularly keen and are preparing a $3 billion big for Tabcorp’s wagering division. The American outfit has vast experience in the gambling industry. It acquired MGM Resorts, Grupo CIRSA, Superbet, and Gamenet recently.

The size of Entain’s offer is unknown but very likely to be similar to Blackstone’s. Again, how the Ladbrokes owner will finance the deal is unknown at this stage.

Entain Recently Rejected a US$11 Billion Bid From MGM Resorts International

Entain was itself subject to a takeover big recently. MGM Resorts offered US$11 billion for the Ladbrokes and Coral owner. Shareholders and investors reacted positively, shares skyrocketing 25% as a result.

MGM decided not to improve its offer after Entain’s Board of Directors rejected the deal. The MGM offer severely undervalued the company, according to a press statement. Entain, therefore, rejected the offer but MGM refused to increase it. Entain’s shareholders wanted the deal to go through. The share price plunged 15% as a result of Entain rejecting the offer.

Tabcorp Raises $100 Million By Selling Stake in Jumbo Interactive

Tabcorp is boosting its war chest with almost $100 million. It has entered an agreement to sell 11.6% of its online lottery business Jumbo Interactive. Stockbroker UBS is buying more than seven-million shares in Jumbo.

David Attenborough, Chief Executive and Managing Director of Tabcorp, explained the decision to sell the 11.6% stake.

“Following the recent extension of our long-standing commercial distribution relationship with Jumbo for a ten-year term to August 2030, there is no longer a strategic rationale for Tabcorp’s shareholding in Jumbo.”

$15 million is the initial financial outlay to Jumbo for the shares. Furthermore, a service fee of 4.65% on subscription revenue on lottery products is payable too. Sales in Australian Capital Territory, New South Wales, Northern Territory, South Australia, and Tasmania have a payable service fee.

The deal, which runs until August 2030, is worth $69 million after tax. Tabcorp plans to use this additional revenue to pay back drawn bank debt facilities.