Vote wasn’t even close

Tabcorp, Australia’s largest gambling company is a significant step closer to splitting up its business. On Thursday, Tabcorp shareholders approved the “demerger” of the company, leaving it to the Supreme Court of New South Wales to give a final thumbs-up. A court hearing is scheduled for May 20; there are no indications that the Supreme Court will do anything but approve the split.

98.78% for with just 0.17% against

The shareholder vote was not the slightest bit close: 98.78% for with just 0.17% against. The remainder are discretionary votes and abstentions.

“We are pleased to have received shareholder approval for the demerger of The Lottery Corporation from Tabcorp,” said Tabcorp chairman Steven Gregg in a press release. “This is an important milestone in repositioning the Group’s portfolio and setting up Tabcorp and The Lottery Corporation for
future success.”

Wagering and media business struggling

As Gregg said, Tabcorp is “repositioning” its portfolio, leading to the impeding division of the company. The reason: its wagering and media business has struggled for years, so much so that investors have specifically called for Tabcorp to rid itself of the lagging part of the business.

Despite the trouble, Gregg remains confident that after the split, both new companies will do well in the long-term.

Last summer, when Tabcorp announced that it was going to begin the demerger process, Gregg said: “The foundations have been laid for Lotteries & KenoCo and Wagering & GamingCo to deliver long-term growth. The two businesses are expected to be leaders in their respective markets, creating great experiences for millions of customers.”

A week ago, Tony Yoo of The Motley Fool pegged Tabcorp as the “hidden value” of the Australian Stock Exchange, saying that the ability of management to focus their operations will be a sizable advantage after the demerger.

He quoted Wilson’s Advisory, an equity research firm, as saying that Tabcorp will benefit from a “market re-rating” of its lottery business and that lotteries are “a defensive, infrastructure-like business with long-dated licences.”

Tabcorp’s lottery business could be so attractive, Wilsons added, that it could be the target of an acquisition offer.

Tabcorp has had plenty of suitors

To that end, Tabcorp was subject of a bidding war last year when it looked like it was going to shed its betting arm. The company confirmed the first batch of offers for its wagering and media business in early February of last year, including one from gambling giant Entain, owner of partypoker.

In late March, the company announced that it had rejected all offers because they undervalued the business. Each bid was around AU$3bn (US$2.07bn).

In early April 2021, Entain upped its offer to AU$3.5bn (US$2.42bn). Apollo Global Management came in a month later with a bid of AU$4bn (US$2.76bn) for not just the wagering and media business, but Tabcorp’s gaming business, as well. It also made an alternative, AU$3.5bn bid for just the wagering and media arm.

BetMakers Technology Group upped the ante three weeks later, offering AU$4bn for Tabcorp’s wagering and media business.

In July 2021, Tabcorp announced that it was rejecting all offers, opting for the demerger strategy. It left the door open to future offers, implying, as it had explicitly said with earlier bids, that the offers were not high enough. The company also said that “uncertain” regulatory approvals needed for any sale were a major hurdle.