Tabcorp fights off $1bn bid from Sportsbet to win Victorian betting licence

In what Tabcorp boss Adam Rytenskild called a ‘momentous’ deal, the wagering giant clinched a 20-year agreement that will add $140m a year to its books.

The debt-laden Victorian government knocked back an offer of up to $1.5bn from Australia’s biggest bookmaker Sportsbet in order to stick with incumbent state wagering licence holder Tabcorp.

In what was a drawn-out process, Tabcorp was announced as the winning bidder for the licence on Monday, in what the company said was a 20-year deal worth $864m in current terms.

Tabcorp shareholders immediately rewarded its management for what was perceived to be a well-valued deal for the company, pushing its shares up almost 25 per cent in trading on Monday to reach its highest level in more than two months.

Tabcorp has agreed to pay the Victorian government $600m upfront in June next year, ahead of its new licence beginning at the end of August, in return for the continuation of its exclusive wagering licence.

It will also pay $30m in annual fixed payments from 2025 to 2043, and while that brings the total cost to $1.1bn over the time, Tabcorp said the yearly fee is not linked to inflation and has a total net present value of $264m.

Tabcorp fought off heavy competition from Sportsbet, which has a market share of close to 50 per cent of online betting in Australia and is owned by London-listed Flutter Group. Sportsbet and Flutter executives are understood to have been subject to extensive probity by the Victorian government, which, as revealed by The Australian, has been considering the rival bids from Tabcorp and Sportsbet since July.

Multiple sources told The Australian that Sportsbet’s offer for the licence was higher than Tabcorp, though it may have included a smaller upfront payment and spread up to $1.5bn in total payments over time.

There was also an option for a dual licence, with Sportsbet management understood to be disappointed the Victorian government did not consider an alternative non-exclusive model.

Ultimately, Tabcorp also offered certainty for the state government having held the wagering licence – and exclusively operated TAB outlets across Victoria – since 1994.

Tabcorp believes its earnings before interest and tax, depreciation and amortisation will be $140m better off annually under the new licence arrangements. Picture: Brett Holburt/Racing Photos

Tabcorp chief executive Adam Rytenskild hailed the deal as a “momentous” one for his company, which will also make three annual payments of $15m to the Victorian racing industry as a result of a change in the operation of the model.

Previously, Tabcorp’s licence was part of a joint venture that directly funded the racing industry. Instead, Tabcorp will keep the customer data from that previous joint venture and the racing industry will be funded from the state-levied point of consumption tax, which is set to rise to 15 per cent.

“I am particularly pleased with the terms we have secured under this new licence which directly addresses the structural reform required in the modern wagering environment. It’s a licence that will allow us to ignite our total Victorian wagering business,” Mr Rytenskild said.

“Purely on financial terms for the business as it is today it is a really good deal, and the other thing is that it gives us the opportunity to grow as we can now choose to invest in our customer offerings in Victoria.”

Tabcorp believes its earnings before interest and tax, depreciation and amortisation will be $140m better off annually under the new licence arrangements.

Mr Rytenskild said its market share in Victoria had been lower than it has enjoyed in other states, and with a less onerous joint venture burden it would pursue a strategy of winning more customers in what is one of the two biggest betting states in Australia alongside NSW.

He also said having more than 900 retail outlets across Victoria with the TAB brand would serve as a marketing tool should a mooted federal government crackdown on gambling advertising on television come into force next year.

“This announcement continues the strong momentum of our transformation. We are a faster, simpler and more nimble company” than when Tabcorp demerged 18 months ago from The Lottery Corporation, Mr Rytenskild added.

Tabcorp is also finalising an agreement with the Victoria Racing Club, the host of the Melbourne Cup at Flemington, for a new broadcast and advertising contract.

The deal will result in Nine Entertainment gaining free-to-air television rights for the Melbourne Cup from next year onwards, and is likely to be clinched early in 2024.