Even a Macquarie Bank turkey won’t fly

IT should now be clear that the ‘smartest and greediest guys in the room’ at Macquarie Bank unveiled an early Christmas turkey eight days ago, writes Terry McCrann.

Macquarie Bank chief executive Nicholas Moore and chief financial officer Patrick Upfold. Picture: Hollie Adams

IT should now be clear that the ‘smartest and greediest guys in the room’ at Macquarie Bank unveiled an early Christmas turkey eight days ago.

At the risk of mixing metaphors, any Tatts Group shareholders silly enough to try ‘eating’ it would, further, discover they were chewing on plastic — of, incidentally, biased George Bush myth not reality, by the bye.

In plain terms, they were just too greedy and smart-arse to the point of announcing they were trying to ‘double-dud’ Tatts holders. That’s to say, MacBank & Co were trying to dud Tatts holders of considerable value by slipping them a dud deal that couldn’t really fly.

There are two critical points to understand about the MacBank-led offer for Tatts. First, if MacBank had been able to find somebody to buy Tatts’s struggling Queensland-based wagering business, that ‘somebody’ would have been in the group upfront.

It isn’t. Hence the clumsy structure of the MacBank deal — to buy the growth utility-like lotteries business and leave Tatts shareholders with the shrinking rump of their company, the wagering arm.

Secondly, the logical buyer is, on so many important levels, the competing bidder Tabcorp. And that is precisely why the Tabcorp offer is so compelling and quite simply cannot be matched, far less topped, by anyone else no matter how ‘smart’ they are and especially when they are so greedy.

At its most basic, MacBank wants Tabcorp to come to its aid (by buying only the wagering business) in not only stiffing Tatts shareholders but also in denying itself, Tabcorp, the full upside of acquiring all of Tatts!

An upside, not exactly incidentally, which would be shared between both Tabcorp and Tatts holders, with the Tatts holders actually getting the bigger slice.

In contrast, under the MacBank proposal, MacBank and its partners not only grab all the upside — such as it would be in a deal where there is no synergistic pay-off as would be the case with a Tabcorp-Tatts merger; but all the very real downside risk is left with Tatts holders!

Tatts Group chief executive Robbie Cooke. Picture: Glenn Hunt

In your dreams, as they say. Indeed, I’d suggest the guys, non-gender specific, at MacBank who, well, dreamed this up, have been putting in too many 20-hour days, or drinking too much of the office Kool-Aid.

To repeat, the MacBank proposal as presently constituted is a turkey: it quite simply cannot fly. The only way MacBank can get it off the ground is to unveil that ‘somebody’, who will buy the wagering business upfront. So that instead of offering Tatts holders $3.40 cash plus one share in a company left with their own wagering rump — a share, which MacBank puts a fantasy value of $1 to $1.60 on; MacBank would then be offering them $3.40 cash and more cash upfront from that ‘somebody’.

That ‘more cash’ would have to be closer to the top-end $1.60 per Tatts share not the bottom-end $1, because paying all cash denies Tatt’s holders any share in any future potential upside — something they can only get from the essentially all-share Tabcorp merger.

In short, Tatts shareholders have to be getting at least $4.80 to close to $5 ($3.40 plus $1.60) in cash from MacBank & Co.

But there is no way MacBank can put that sort of money on the table. Not, unless it wants to forego the sort of super-profits it looks for in any deal, and in this one can only come from one source: from Tatts and its holders.

There are two critically important things that Tabcorp is offering Tatts holders, which MacBank quite simply cannot match, even if it was prepared to be less ‘MacBank greedy’.

The first comes from the savings — that’s to say real profit dollars every year forever — of putting the two wagering businesses together to create a national tote monopoly.

The second is a share in the future upside not just of the lotteries as a stand-alone business, but in the further synergies of having the lotteries and the wagering in one corporate entity.

To my friends at MacBank: enjoy your Christmas turkey.

Slater & Gordon managing director Andrew Grech. Picture: Britta Campion

S&G’s ONE-WAY TROLLEY RIDE

OH dear, it just goes from bad to worse down at ambulance-chasing carcass-feasting ground zero: Slater and Gordon.

It was bad enough when fellow ambulance-chaser and carcass-feeder Maurice Blackburn — what S&G calls its “major competitor” — sunk its teeth into the S&G carcass a couple of months back with, what else, a class action. Now ASIC has joined the party.

Amusingly — as in bizarrely, not entertainingly — S&G shared the ASIC news with the market and its shareholders under the heading: “Market Update”.

Is that an admission that the company knew the news would — should? — send the share price even lower?

It’s almost as if the guys, non-gender specific, at S&G know they are all on that trolley car — one of the great, of many, quotes from the greatest of film noir movies Double Indemnity: the one you have to ride “all the way to the end of the line and it’s a one-way trip and the last stop is the cemetery”.

Here’s a thought: why doesn’t S&G slap a class action on itself over the matters that ASIC is investigating; then admit them, pay itself out, and distribute the proceeds to its holders?

That’s about the only way those holders are going to get anything out of the carcass, as it rots through summer and into autumn and winter.

All the assets at S&G, such as they are, walk out the door at night. You’d increasingly wonder why any would return in the morning.

Originally published as Even a Macquarie Bank turkey won’t fly