Private equity and Matthew Tripp circle Tabcorp in potential break-up deal for wagering giant

Two parties are understood to have undertaken months of work on a tilt at Tabcorp, including enlisting the highest rated online gambling executive in the country.

Online bookmaker CrownBet boss Matthew Tripp Picture: Mike Keating.

Big private equity firms are circling Tabcorp and are poised to make a bid for the embattled wagering company in a deal that would see renowned digital betting pioneer Matthew Tripp emerge as the boss of the TAB wagering arm.

Mr Tripp, the former boss of BetEasy, had previously been in a joint venture between Crown Resorts and his CrownBet business, and also built up the No 1 digital wagering business in Australia, Sportsbet, from a $250,000 operation in 2005 before selling it for $388m in a deal finalised in 2011.

He is understood to have been approached by two private equity consortiums in recent weeks. One is keen to bid for the entire Tabcorp business currently worth about $7.7bn, The Australian has been told by sources familiar with the plans. With a premium to the current share price the bid may be worth $9bn.

The other group is interested in just the TAB wagering business, potentially valuing the unit at up to $3bn.

One source said the parties involved included a private equity firm “that does not get any bigger in the world”, suggesting it may involve a giant such as KKR or TPG.

A KKR-backed group, the Pacific Consortium, which included Macquarie Group, made an unsuccessful $6bn bid for Tatts Group before the lotteries outfit merged with Tabcorp four years ago.

Other potential parties involved this time include wealthy Australian families and individuals, infrastructure and superannuation funds. Sources with know­ledge of the potential deals have told The Australian that the group wanting to buy the entire Tabcorp business is attracted to its strongly performing lotteries arm and that Mr Tripp is the best digital betting executive in Australia for turning around Tabcorp’s struggling wagering arm.

That private equity group is said to be more advanced in its plans for a tilt at Tabcorp, and is reported to have been working on the transaction for several months and to have held some informal meetings with Tabcorp executives or representatives.

One source said the parameters of the deal had been closely considered by the group’s investment committee and should a formal tilt eventuate, a bid would be launched by Christmas.

Mr Tripp would not answer questions about the plans when contacted by The Australian. Tabcorp also would not comment. Tabcorp previously said its gaming services division was under review, meaning it could be sold.

Any potential deal for the company is likely to face a long approval process with state governments and racing bodies.

But a bid would probably be welcomed by many large Tabcorp investors, who have watched its sluggish performance with concern since the $11bn company-transforming merger with Tatts in 2016.

Tabcorp recorded an $870m statutory loss for 2020 and is not paying shareholders a dividend. It also launched a $600m pro-rata accelerated renounceable entitlement offer to pay down debt and strengthen its balance sheet.

Executive and boardroom changes are looming, with chairman Paula Dwyer departing at the end of December after nine years in the role, to be replaced by Steven Gregg, while long-serving chief executive David Atten­borough is stepping down in early 2021. A replacement for Mr Attenborough is yet to be announced by Tabcorp.

The wagering giant has suffered with the shutdown of its retail outlets for several months this year due to the COVID-19 pandemic. TAB shopfronts in Victoria only opened at the start of this week, in time for the Melbourne Cup on Tuesday.

But Tabcorp said betting with it on the Cup was down 6 per cent on 2019. Meanwhile, digital market leader Sportsbet, which made a $200m profit in Australia earlier this year, said it took twice the bets on the big race this year than last year.

Racing administrators could welcome the involvement of Mr Tripp at Tabcorp given that company’s joint ventures with most jurisdictions around Australia which sees Tabcorp share in income from parimutuel betting with the racing bodies.

The share of money flowing from Tabcorp to racing has fallen in recent years as more punters bet online and via their mobile phones with the competing corporate bookmakers who specialise in digital wagering.

Mr Tripp was one of the pioneers of that industry in Australia.

It has successfully taken market share from Tabcorp in the past decade, and the a situation was exacerbated this year by the shutting of retail betting outlets and pubs and clubs for several months.

Mr Tripp, the son of legendary bookmaker Alan Tripp, bought wagering start-up Sportsbet for $250,000 in 2005 before selling it to Paddy Power (now Flutter Entertainment) for $388m in two deals in 2009 and 2011.

Mr Tripp then started BetEasy in 2013, buying the old Betezy business, and later sold a controlling stake to James Packer’s Crown Resorts to start CrownBet. That business later become Bet­Easy when The Stars Group, a Toronto-listed group, took a majority stake in 2018.

Stars bought the 20 per cent it did not own of BetEasy from Mr Tripp and his executives last December, before it merged with Flutter in a global $US12bn deal. Locally, it saw the closure of the BetEasy brand in favour of Sportsbet.

Mr Tripp has a non-compete clause with BetEasy, but whether that applies after the global Flutter deal will be examined by lawyers.

He is also the chairman and part-owner of NRL champions Melbourne Storm.