Tabcorp wins Victorian wagering licence after long bidding war

Tabcorp has retained the sole rights to operate retail betting in Victoria’s TABs, pubs and clubs for the next 20 years, in a deal that ends a long bidding war with rival Sportsbet.

Tabcorp, which has held the licence in the state since 1994, told the ASX on Monday that the Victorian government had committed to a new deal worth more than $860 million. Its existing arrangement is due to expire next August.

Tabcorp chief executive Adam Rytenskild has secured a deal which will result in Tabcorp holding the Victorian wagering licence for the next 20 years. Credit: Eddie Jim

Tabcorp’s boss, Adam Rytenskild, said the new licence was stronger than the existing arrangement and those in other jurisdictions.

“It really is the best licence in the country now. It’s got much stricter retail exclusivity and a commitment by government to ensure that exclusivity is maintained throughout the term of the licence. It puts wind in our sails going into next year,” Rytenskild said.

“We think this sets the standard for retail licences going forward.”

Under the deal, Tabcorp will make an upfront payment of $600 million to the Victorian government in June, and $30 million in annual fixed payments from 2025 to 2043, which would take the total payment to $1.1 billion. Tabcorp said the payments were not linked to inflation, so the value was actually $864 million.

Rytenskild said the terms of the deal recognised the structural changes to wagering brought on by online bookmaking.

“This is a strong licence for the modern era and it’s the prototype moving forward – it ensures a safe wagering ecosystem for the community and incorporates stronger protections to ensure genuine retail exclusivity,” he said.

Sportsbet had originally placed a higher bid that sought to split the licence between a number of bookmakers. If Sportsbet had been successful, Tabcorp and Sportsbet would both operate betting shops in Victoria.

Rytenskild said Tabcorp did not increase its bid throughout the process despite industry rumours to the contrary.

“The government had a process where the money was important, but there were also other factors. This was by far the most rigorous probity process I’ve been through run by the Victorian regulator that was formed off the back of the Crown Resorts inquiry,” Rytenskild said.

The negotiations between the bookmakers and the Victorian government have been ongoing for the bulk of this year.

According to sources close to the negotiations who were not authorised to speak publicly, Tabcorp emerged as the likely winner ahead of spring racing season but Sportsbet had been kept in the dark. Wagering sources who were not authorised to speak publicly said Tabcorp’s ASX announcement had blindsided Sportsbet, which had only been officially informed about the decision minutes before.

Tabcorp said the sole rights would have boosted its 2023 earnings before interest, tax, depreciation and amortisation by $140 million if finalised within the period.

The decision is said to have blindsided Sportsbet. Credit: Getty Images

Tabcorp’s share price increased by more than 20 per cent to 90¢ following the announcement. The wagering stalwart has been struggling on the ASX for the past year, with its share price down more than 30 per cent.

Racing Victoria recorded just $163,000 in net profit in 2023, down from $14 million in 2022. Its total wagering revenue fell 7 per cent in 2023 to $553 million, according to documents filed with the corporate regulator.

Tabcorp’s existing deal incorporates a joint venture with Racing Victoria. Its contributions fell by 5.1 per cent in 2023 as more punters sought out digital betting over retail.

Under the new deal, Tabcorp will no longer pay these joint venture contributions but will pay $15 million in additional funding for each of the first three years of the new licence. The transition is still being finalised with the state’s racing bodies. After the three-year period, Tabcorp will retain all profit generated by the Victorian retail market.

A spokesperson for Victorian Racing said the body awaited further details from the government and Tabcorp to understand the implications for the industry.

The new deal stipulates Tabcorp will pay $2 million to the Victorian government to fund gambling harm research and assist problem gambling programs within the state. It will also contribute $2.5 million into existing animal welfare programs within the racing industry.

Victoria recently increased its point-of-consumption tax to 15 per cent to match NSW, Western Australia, South Austraia and Tasmania. This was hailed as a win for Tabcorp – which has long called for the levelling of taxes it and corporate bookmakers pay – and the state racing industry.

Jeffries analyst Simon Thackray said the deal should reduce investor uncertainty, but he expected wagering conditions to “remain soggy”. Thackray said it was likely Tabcorp’s commitment to pay a fixed fee to Victorian Racing as well as the additional $15 million for next three years was the reason its bid was successful.

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