Tatts, Tabcorp revive merger talks

Wagering giants Tabcorp and Tatts are in negotiations to revive a previously failed $9.4 billion merger deal.

Tabcorp CEO David Attenborough holding the Melbourne Cup, for the launch of the Spring Racing Carnival. Pic: Stuart McEvoy

Australian wagering giants Tabcorp and Tatts have confirmed they are in talks in a bid to revive a previously failed $9.4 billion merger deal.

The companies both requested trading halts today pending an announcement in relation to a potential change of control transaction.

Tatts (TTS) said in its trading halt request, lodged with the Australian Securities Exchange, that the change of control transaction under consideration would be via a scheme of arrangement.

Deutsche Bank has previously said it estimates that Tabcorp (TAH) could pay up to $4.75 per Tatts share for 100 per cent of the company in order to be 1 per cent earnings per share accretive.

The bank said that figure assumed $80 million in synergies and debt/equity funding of 40/60 per cent.

Tatts boss Robbie Cooke hinted in June that he was open to dusting off the previously failed merger talks with Tabcorp.

Tatts CEO Robbie Cooke

Tatts and Tabcorp, which combined would create a $9bn gaming and lotteries giant, failed to reach an agreement on key transaction terms during merger talks late last year.

The companies ended merger talks because they could not agree on price. When they both confirmed The Australian’sreport, in November, that they were in discussions, Tatts’ share price was $3.92 and Tabcorp was $4.42. Tabcorp closed at $4.89 ­yesterday, while Tatts was $3.59.

Mergers of equals are normally struck based on a stock’s last closing price ahead of a deal being announced. Tabcorp was not keen on that equation last November given its shares had dropped about 13 per cent around that time, ­following a trading update, which had disappointed the market.

Investors have been ­quietly pushing for renewed talks and the market has consistently suggested that Tatts’ wagering arm would be better run by Tabcorp.

Tatts, which derives about 70 per cent of its revenues from its lotteries business, relaunched its wagering business as Ubet last April.