Tabcorp lotteries split delivers $1bn windfall for investor as Sue van der Merwe takes the reins of new Lottery Corp

Investors had $1bn reasons to smile on Tuesday when the combined value of Tabcorp and its spun-off lotteries business surged 7.7 per cent.

Incoming The Lottery Corporation chairman Steven Gregg and CEO Sue van der Merwe ring the bell at the ASX in Sydney to commemorate the first day of trading of The Lottery Corporation. Photographer: Chris Pavlich

Tabcorp’s long-awaited spin-off of its lotteries business has delivered shareholders a bonanza, companies’ combined market value soaring 7.7 per cent on Tuesday.

In its first day of trading on the ASX, The Lottery Corporation — which includes the old Tatts business, with Tabcorp’s national Keno pubs lotteries unit thrown in — jumped 2 per cent to $4.70 — giving the debutant a market cap of $10.46bn.

It comes after Tabcorp took over Tatts five years ago in an $11bn merger. But for more than a year, investors have campaigned for Tabcorp to separate the strong lotteries business from its struggling ­wagering arm, and had their wishes granted when Tabcorp chairman Steven Gregg formally announced the demerger in July.

Tabcorp’s shares were cut by 80.2 per cent to $1.06, on revaluation of the company after the split from the lotteries division, giving it a market capitalisation of $2.35bn.

The combined value of both companies, $12.8bn, compares to Tabcorp’s pre-split market capitalisation of $11.9bn, delivering investors almost a $1bn windfall.

Senior Tabcorp executive, and former Tatts chief operating officer, Sue van der Merwe takes charge of the new Lotteries Corp. She told The Australian the company would accelerate its omni-channel strategy, expanding its online offering while maintaining its retail network, which she said was key to driving brand exposure.

“We’re very committed to our retail channel. They play a very important role in our business and through that channel we support thousands of small businesses,” Ms van der Merwe said.

“And the profile and the visibility of that retail channel provides our brands is very important.”

Ms van der Merwe said the retail outlets — which include newsagents and other mixed businesses — needed to work “seamlessly” with its digital offering.

“We’ve been optimising our channels so that the flow through the digital and the retails are strong. From a customer-led lens we approach all of our channel decisions from an omni-channel point of view, so that it enables people to transact seamlessly in the way they want, when they want.

“So the ability to use your wallet or online wallet for example both in-store or in digital, to have your tickets showing up — whether you buy them in store, online, on your app — you have all your prizes paid into a single account have been some of the initiatives that we’ve put in place.”

The return of inflation and higher interest rates did not phase Ms van der Merwe, who has worked her way up through the executive ranks and gained about eight promotions since starting as a brand manager of what was then the Queensland Lottery Gold Casket in 1990 — when interest rates were around 17.5 per cent.

“One of the business’s real strengths is that it has proven to be very resilient through different economic cycles.

“Our focus on driving long-term sustainable revenue growth is something that has worked very well for us. The strategy that we have in place is around being customer-led, product innovation, active management of game portfolio, optimising our channel distribution — is all working very well for us and has continued to do so through all those economic cycles.

“The interest in the games is more driven by the offers that we put out there and the changes that we make to the games than driven by economic cycles. People are really spending a small amount of money to win a big prize.”

But Ms van der Merwe said the Covid pandemic had delivered the lotteries business a “positive benefit”.

“There have been less options for people in terms of entertainment through Covid and so we’ve seen a further uptake in our lotteries products. Alongside that, we have also been building digital capability.”

The remaining Tabcorp on the other hand will drop out of the top 50, and is unlikely to make the cut for the S&P/ASX 100, suggesting that its market capitalisation will fall below $5bn, which could see some index-focused funds forced to exit.