US appeal in BetMakers’ $4bn bid for Tabcorp

Matthew Tripp will try to sell the dream of exposure to the hot US betting market to Tabcorp shareholders.

Matthew Tripp, a digital wagering pioneer and former boss of Sportsbet and BetEasy, has delivered the proposed transaction to the Tabcorp board. Picture: Stuart McEvoy

Matthew Tripp will try to sell the dream of exposure to the hot US betting market to Tabcorp shareholders after spearheading a $4bn bid to join its wagering division with ASX-listed BetMakers.

Mr Tripp, a digital wagering pioneer in Australia, signalled his intention to re-enter the local sector and help re-energise Tabcorp’s moribund betting arm by lodging the bid on Friday.

While Tabcorp’s wagering and media business have lost ground to digital competitors such as Sportsbet – which Tripp helped turn into a force before moving to BetEasy – it is the US market that Tripp is hoping will entice Tabcorp shareholders to gamble on his cash and scrip bid with wagering technology outfit BetMakers.

“In transactions there’s usually a winner and loser. In this one I think both sides can win. Tabcorp’s availability to leverage BetMaker’s technology in the US and more broadly the international side of things, and bundling up and packaging Tabcorp’s expertise and content internationally and particularly into the US with BetMakers, makes this tie-up compelling,” Mr Tripp told The Weekend Australian.

“Domestically, we think we can also improve the business in certain areas alongside existing management to get Tabcorp back on track with revenue and market share gains in a relatively short period of time.”

Mr Tripp and BetMakers are offering Tabcorp shareholders $1bn in cash and $3bn in equity in a combined entity that he believes can unlock $5bn in value by revamping Tabcorp’s Australian operations and pushing into the fast-growing US market with the technology offered by Bet­Makers.

US states are allowing online betting for the first time after decades of it being banned outside casinos, resulting in a stampede into the market. Australian firms such as Pointsbet, now a $2bn company, and BetMakers, which has surged in value in the past year, have become market darlings.

Mr Tripp said he hoped Tabcorp’s wagering business would be rerated accordingly by investors should his bid prove successful and that racing regulators that share in Tabcorp’s performance should react positively.

“The business is reasonably priced now but there is an opportunity to reposition Tabcorp as the premier operator, where it belongs and where it should be – and trading on a higher [profit] multiple.

“It would be positive for Australian racing as we would grow their market share and revenue would flow back to the industry. If we are seen favourably we will do all we can to ensure that racing thrives over the next few years.”

The Australian revealed details of the bid online on Friday. The mooted plan was first revealed by The Australian in March and comes as Data Room revealed this week that Mr Tripp was poised to make a play for Tabcorp’s betting assets.

The indicative proposal would see Tabcorp shareholders emerge with a 65 per cent stake in a ­combined entity, which BetMakers and Mr Tripp believe to be superior to other offers before the Tabcorp board.

Tabcorp shareholders welcomed the prospect of a bidding war, pushing the shares to a 12-month high before ending up 2.17 per cent on Friday at $5.17. Private equity firm Apollo Global Management has bid $4 billion for Tabcorp’s wagering, media and gaming services divisions, while Entain has bid $3.5 billion cash for the wagering and media arms.

But BetMakers shares fell 16.25 per cent to $1.34 and a spokesperson for the London-listed Entain, which owns the Ladbrokes and Neds brands in Australia, hit out at the new bid.

“BetMakers is proposing a raid on Tabcorp shareholders with the loss-making BetMakers to contribute just 3 per cent of the revenue and 0 per cent of the earnings but take 35 per cent ownership of a combined business,” a spokesman said.

“It’s a risky proposal for Tabcorp shareholders which has little financial logic, based on receiving BetMakers scrip at a significant premium to market.

“This stands in stark contrast to Entain’s attractive all cash offer.

“There’s nothing in this for Australian racing which would be left a poor cousin to BetMakers’ US ambitions.”

Mr Tripp said he had expected Entain would “come out swinging” when he finally revealed his hand, but questioned its ability to close a deal for Tabcorp.

“They will probably take two years to have their deal validated (by regulators) and their $3.5bn will be lower by then. And it is OK to throw rocks but they haven’t really proven themselves in this market.

“They would have been lossmakers themselves if it hadn’t been for Covid (which boosted digital wagering levels).”

Analysts were cautious about the bid, with Credit Suisse telling clients it was more likely Tabcorp would demerge its strong lotteries division from wagering. “We retain the view that Tabcorp is more likely to demerge than accept the BetMaker‘s proposal.”

Sacha Krien of Evans & Partners said he estimated “the deal to be earnings dilutive for Tabcorp shareholders”.

Tabcorp acknowledged the bid but in a statement said: “The Tabcorp board has not yet formed a view of the merits of the proposal and will assess it in the context of the previously announced strategic review.”

Outgoing chief executive David Attenborough is overseeing the review, and is expected to report to the board in late June.