Fox Corp. Prepares Tabcorp Bid
Fox Corporation is preparing a bid for parts of Tabcorp’s business, according to media reports. Fox is working with other investors to launch a bid for Tabcorp’s betting and media unit. The investment firm remains anonymous.
Tabcorp’s betting and media unit is highly sought after, meaning Fox faces fierce competition. British gambling giant Entain, owners of Ladbrokes, offered Tabcorp $3 billion for its betting and media unit. American private equity fund Apollo Global Management has its hat in the ring also.
A move for Tabcorp makes perfect sense for Apollo, who are rapidly expanding. Apollo has invested almost $6 billion in gaming deals over the past few months. The deep-pocketed American outfit bought International Game Technology (IGT), Great Canadian Gaming Corp, and the Venetian and Sands Convention Center in Las Vegas. Having an Australian presence puts more irons in Apollo’s fire.
Both Entain and Apollo face opposition from Fox for Tabcorp’s assets. Most gambling companies are riding the wave in the United States, where the sports wagering market is the fastest-growing on the planet. The Australian market, however, is established and worth billions of dollars.
Australians spend more than $24 billion per year on horse racing wagers and sports bets. It is estimated every Aussie between the ages of 18 and 49 spend, on average, $775 a month on sports betting. It is easy to see why companies want a slice of that pie.
Fox Corp. Registers Trademark in Australia
Australia-born American Rupert Murdoch owns Fox Corp; his family hold 39% of the company’s stock. He serves as chairman, while Lachlan Murdoch, his son, is executive chairman and CEO.
Fox primarily focuses on television broadcast, sports broadcasting, and news but is dabbling in the gambling world.
Murdoch purchased a 4.99% stake in The Stars Group for US$236 million in May 2019. The Stars Group recently merged with Flutter Entertainment. This left Fox, under its gambling arm FOXBet, as one of Flutter’s biggest shareholders. Fox owns an 18.5% stake in FanDuel, Flutter’s major American sports betting platform.
A Fox bid looks highly likely considering information from the Australian register. Fox Media LLC received approval for the FoxBet trademark in October 2020. Why else would they register their brand if they did not plan on expanding into the Australian market?
Investors Want Unwinding of Tatts Group Merger
Tabcorp’s senior management is playing its cards close to its chest. There has been no word from them since the company’s half-year earnings reports in February. Some investors are calling for Tabcorp to unwind its merger with the Tatts Group, even if it does not plan to sell the betting and media arm of the business.
The lotteries business is thriving, but the same cannot be said of its bookmaking operation. Investors are of the school of thought that the overall Tabcorp business will be more attractive without the bookmaking arm pulling it down.
Tabcorp’s sportsbook business is not what it once was. It has lost significant ground to online competitors, including Ladbrokes and Sportsbet. Flutter’s renewed investment in Sportsbet could see Tabcorp fall even further behind the curve.
Matt Williams is a fund manager for Airlie Funds Management. He gave his thoughts on the demerging of Tabcorp’s businesses.
“The interest fro the various parties have let the genie out of the bottle. So that even if this interest does not end up in a sale, shareholders will want the two businesses separated.
Williams’ firm has a small holding in Tabcorp. He called for Tabcorp to begin the demerger sooner rather than later.
“This would most likely be a complex process, so the sooner they start at least the early preparatory work, the better. I’m slightly surprised that there hasn’t been more information around these bids, but I’m sure that will occur in due course.