Entain gives it another go

Entain has upped its efforts to acquire the wagering and media arm of Australian gambling business Tabcorp, increasing its bid by AU$500m (US$389.4) to a total of AU$3.5bn (US$2.73bn).

Tabcorp revealed details of the new “unsolicited, non-binding and indicative proposal” in a statement released on Tuesday. The ASX-listed company said its board still needs to form “a view on the merits” of the offer.

a leading, integrated multi-channel and multi-brand wagering company.”

Meanwhile, Ladbrokes owner Entain confirmed the offer in a public statement of its own the same day. The operator described the proposed deal as in line with the company’s current M&A strategy. It said combining the businesses would create “a leading, integrated multi-channel and multi-brand wagering company.”

Rebuff of previous bids

Tabcorp’s investors recently increased pressure on the company to sell its less successful wagering and media segment. According to a February ASX statement from the company, this resulted in “a number of unsolicited approaches and proposals,” with the interested parties including Entain, Fox Corporation CEO Lachlan Murdoch, and private equity group Apollo Global.

reaching an agreement is not certain

Despite receiving offers from various companies, Tabcorp has consistently affirmed that reaching an agreement is not certain, supported by its rejection of all initial bids in March. The gambling business said the unsolicited proposals, all of which stood at around AU$3bn (US$2.33bn), undervalued the asset.

Instead of agreeing to a sale, the Australian operator revealed plans for a strategic review with the aim of maximizing value for shareholders. The company will weigh two options as part of this assessment, the first being the sale of its wagering and media segment at a higher price, and the second a demerger.

In its statement on Tuesday, Tabcorp announced it will consider Entain’s new AU$3.5bn (US$2.73bn) offer in the context of this strategic review.

The chances of approval

Speaking with the Brisbane Times in March, Tabcorp chairman Steven Gregg said he would be “very happy” for bidders to return with higher offers. He argued, however, that the monetary value of a bid must outweigh the regulatory difficulties inherent in such a deal, pointing specifically to the required approval of state-based racing bodies. “It’s just as much about… deal certainty as it is value,” the chairman commented.

analyst Sacha Krien believes Tabcorp will seriously consider the deal

As such, market and industry sources have suggested Tabcorp wants at least AU$3.5bn (US$2.73bn) for its struggling segment. Now that Entain has put that offer on the table, Evans and Partners gaming analyst Sacha Krien believes Tabcorp will seriously consider the deal. He told the Sydney Morning Herald on Tuesday that the new offer would receive the support of Tabcorp shareholders.

Although the deal may bring other higher offers out of the woodwork, Krien described Entain as the best “credentialed” company to take over the Tabcorp segment.