Tax victories and a new app bode well for Tabcorp, but a hot August looms as takeover suitors circle
August is always a big month for bookmakers. This year it looms as a make or break for Tabcorp and its new chief executive Adam Rytenskild.
August is always a big month for bookmakers. This year it looms as a make or break for Tabcorp and its new chief executive Adam Rytenskild.
It is a month that will likely see suitors return to bid for the wagering giant, a little over a year after its previous board rejected offers of up to $4bn for its wagering assets.
Since then, Tabcorp has spun out The Lottery Corp in May into a new listed company and left Rytenskild in charge of a wagering and media business with market capitalisation of about $2.35bn.
No wonder then that potential suitors, which last year included London-listed Entain, private equity firm Apollo Global and even renowned bookmaker Matthew Tripp and ASX-listed BetMakers, have dusted off plans for another tilt.
The Australian has been told potential bidders have begun planning how to overcome regulatory issues should they lob an offer for Tabcorp – likely between $2.5bn and $3bn – and identifying how they believe Tabcorp’s operations could be improved and who would be in charge. Tabcorp reports its results in August. Should they disappoint and its share price fall, expect potential bidders to make a move.
Rytenskild says he simply has to concentrate on his job. “My focus is on transforming and growing the business … we are going to get on with that and not be distracted.”
Tabcorp has racked up a couple of big wins in the last two weeks, successfully lobbying for tax changes in Queensland and NSW that will be worth $46m for the company and, more importantly, also weaken its corporate bookmaker rivals like Sportsbet and Bet365 who will have to pay higher point of consumption taxes.
The state government decisions have Tabcorp’s competitors up in arms – Entain CEO Dean Shannon says Tabcorp has “gamed the Queensland tax system without a hint of due process” – but Rytenskild is relishing a bit of payback for the bookies who have for years cut into his market share.
“I want us to have more heart and more courage right across everything we do,” Rytenskild says. “I want us to be different as a company. We are loosening the handcuffs a bit and we want our culture to be about transforming and changing.”
Change is badly needed. Incredibly, Rytenskild reveals Tabcorp’s betting app is operating with technology that is 10 years old. It is little wonder that his company’s more digital-savvy competitors have stolen so much market share, especially during Covid-19 lockdowns when punters were at home betting on their phones and could not access Tabcorp retail outlets or place a bet in pubs and clubs.
Rytenskild admits Tabcorp needs to marry its regulatory wins with a stronger operational business, lest it be accused of being better lobbyists than bookmakers. Hence the refresh of its betting app that will launch in time for Spring Carnival at the end of August, the most lucrative time of the year for the sector, starting with the Memsie Stakes at Caulfield on August 27 and peaking with the iconic Melbourne Cup in early November.
“It is more than just an app, it is a whole new digital foundation for us. It will allow us to change our product more quickly and provide updates to our customers more quickly,” Rytenskild says.
“It will unpick a lot of regulatory complexity within our technology as part of it. It will be good for racing and sport through spring and beyond. I think it is going to be sensational.”
The new app and the regulatory wins have clearly given Rytenskild confidence, and he will walk into The Ivy in Sydney next Tuesday for Tabcorp’s first investor day in five years with a spring in his step.
But August is just around the corner. There’s the financial results and the start of the Spring Carnival, as well as a few other important matters for Rytenskild to attend to. One is finalising a tilt for the West Australian TAB, with bids due on August 1.
Tabcorp is competing with Entain, the owner of the Ladbrokes and Neds, for that prize, which will likely come with a $1bn price tag. A wildcard is Tripp, who would like WA to be a cornerstone of the operation that he is launching with News Corp, publisher of The Australian.
Whether Tripp has the financial firepower for a WA bid remains to be seen, but he will be a fresh competitor for Tabcorp with his new business, which The Wall Street Journal reported as launching with the BetR brand. That business will launch in time for the Spring Carnival. Sportsbet, owned by London-listed Paddy Power, has also considered launching another brand in Australia, potentially Fanduel.
Rytendskild says Tabcorp can afford the WA bid. “We’ve got very little debt, which is good. And we’ve got debt facilities. I’m interested in licences that help make us more competitive and grow the business.”
There’s a certain irony in Tabcorp competing with Entain for the WA deal, given the latter lobbed a bid for the former last year. But Shannon, based in Queensland, is critical of the state’s decision to raise the point of consumption tax on the industry from 15 to 20 per cent.
The state also changed its agreement with Tabcorp to ensure it pays a lower proportion of revenue to the racing industry and government overall that will see it $30m better off annually.
Not surprisingly, Rytenskild is delighted with the Queensland decision, and that of NSW earlier this week which will see it also raise point of consumption taxes and provide Tabcorp – which has an exclusive retail outlet licence in NSW that helps fund the racing industry – with $30m in offset payments over two years.
“These are good early moments for us. The levelling of the playing field is important for us and also for the funding of the racing industry.”
But that level playing field doesn’t necessarily extend to Tabcorp’s assets. When asked if Tabcorp would allow other bookmakers to advertise on its Sky Racing broadcast network, Rytenskild says: “We do sell our pictures to some of the other operators but at the end of the day they are our assets. You don’t see Channel 9 advertising on Channel 7, do you? We all have to play to our strengths.”
Shannon won’t say if he will be back for another takeover tilt at Tabcorp, but he does say punters will get worse odds as a result of more taxes and other costs that will need to be passed on.
Rytenskild does not agree with the premise, but the proof will arrive during the Spring Carnival. He needs punters to embrace his new app. If they don’t, trouble looms. His competitors have simply been better at it. Expect plenty of action – on and off the track.
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