Private equity fund Blackstone is understood to have weighed a move to buy Tabcorp’s $3bn wagering arm as part of a proposal that may have seen renowned digital betting pioneer Matthew Tripp run the business, according to sources.
But it is understood the buyout fund is not currently in pursuit of the business, leaving the focus on Ladbrokes owner Entain.
Sources say Entain remains a highly motivated buyer, with an offer in which shareholders get Chess Depositary Interests (similar to shares) from Entain as payment for the wagering arm, with some cash so they can participate in some of the upside of the business.
London-listed global betting firm Entain confirmed on Tuesday night that it had lodged a takeover proposal for Tabcorp’s wagering business that would involve a break-up of the Australian $9bn gambling giant.
Working on the transaction on Entain’s behalf is highly regarded banker Edward Burley from Macquarie Capital.
Sources close to Tabcorp say it is no surprise that Macquarie is on the ticket for Entain, given that its Australian chief financial officer, Lachlan Fitt, spent six years at Macquarie Research before he was Tabcorp’s general manager and head of corporate strategy for four years.
Macquarie was also involved in a takeover attempt of the company in the past.
A KKR-backed group, the Pacific Consortium, also included Macquarie, along with Aware Super and Morgan Stanley Infrastructure Partners, when it made an unsuccessful $6bn bid for Tatts Group.
This was before the lotteries outfit merged with Tabcorp more than four years ago. The plan at that time was for Ladbrokes to take on the wagering arm as part of a break-up play.
Market analysts say an acquisition by Entain would add 30 per cent to Ladbrokes’ market share, and would be a major gain for Ladbrokes, given that greater market share offered far greater returns in the wagering industry and there was plenty of upside to be had, given the business had been hard hit by the global pandemic.
Some market experts have questioned what happens to the less attractive lotteries part of the Tabcorp business should a wagering demerger occur.
While market analysts have suggested that the wagering arm is worth between $2.5bn and $3bn, some shareholders believe the unit is worth between $3.4bn and $4.3bn before adding a control premium, equating to between eight and 10 times its forecasted earnings before interest and tax for the 2022 financial year.
Blackstone, meanwhile, was thought to be one of the funds that had been in talks with former BetEasy boss Mr Tripp about a possible acquisition of the wagering arm in 2020.
It is also understood that overseas pension funds, such as those out of Canada, have also been circling the Tabcorp, while sources say Ladbrokes’ major rival, Flutter Entertainment, which owns Sportsbet and comprises the merged Paddy Power and Betfair entities, will probably now consider its options with respect to the Tabcorp wagering arm.
However, some question whether Flutter would face opposition from the Australian Competition & Consumer Commission.
DataRoom reported Tabcorp had received a break-up proposal for the company about two weeks ago that involved the buyer taking the company’s wagering arm.
The company later confirmed that it had received at least one approach for its wagering and media unit, which includes pay-television channel Sky Racing.
Sources had been pointing to Entain’s business Ladbrokes as the prospective suitor before Entain announced to the London Stock Exchange on Tuesday night Australian time that it had made a non-binding indicative offer to acquire Tabcorp’s wagering and media business, saying discussions were at an early stage.
Market experts say Entain would need to win over the Australian racing industry to ensure it received its blessing for a deal to proceed.
Some market experts believed that the deal would probably make more sense for Entain than private equity and it could probably beat private equity firms on price when it came to buying the wagering arm due to synergies.
Morgan Stanley and Citi are close to the Tabcorp situation and could be working with buyout funds.
Tabcorp is advised by UBS.
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