Ladbrokes parent company Entain is offering $3 billion cash for Tabcorp’s wagering and media arm, DataRoom has learned.
It comes as pressure mounts for the $9.8 billion Australian betting company to reveal more details about the proposal when it delivers its half year results on Wednesday.
The understanding is that as part of its negotiations with Tabcorp, Entain explored various structures for a purchase of the wagering division.
Among the proposals were a cash bid and an alternative involving cash and CHESS depository interests.
However, following prolonged discussions about different structures, it is understood that what is currently on the table is a cash offer at $3bn, in line with valuation estimates by analysts.
Yet the door is understood to remain open for a deal also with a scrip component, should that be favoured by some shareholders, with negotiations likely to also continue on price.
Tabcorp said on February 2 that a number of proposals for the wagering and media operations had been received, after DataRoom revealed that a party had put forward an offer for that part of the business about two weeks earlier, with sources pointing to Ladbrokes.
The results on Wednesday could see the company announce a demerger of the Tabcorp wagering and media arm, with the company said to be holding out for an offer worth at least $3.5bn for the unit.
Analysts from JPMorgan said in a research note last week that a $3bn sale of wagering was “inferior to announcing a demerger at the 2021 half year result and slowing the game down (would be best for) maximising shareholder value”.
They argue that this would enable the market to determine the value of both the lotteries and the wagering arm and that regulatory approval could take longer for a sale than a demerger, which typically takes 275 days on average.
However, the thinking among others is that this would not come without its risks, with bidders less likely to vie for the business once it is spun off.
The big unanswered question centres on how Tabcorp’s wagering arm performs amid the uncertain environment linked to the global pandemic, when JobKeeper payments wind down.
Tabcorp, which is said to be a weaker performer in the digital wagering arena compared to its global rivals, holds the $400m-plus racing licence in Victoria.
The licence is due to expire in 2024 and its rivals, including Ladbrokes and Flutter, have been competing strongly to take it off Tabcorp’s hands.
Apollo Global Management bid for all of the company except its lotteries arm about three weeks ago, while Entain confirmed to the market this month it had bid for the wagering and media arm.
Digital betting pioneer Matthew Tripp is understood to have come to Tabcorp’s board with an offer to buy the wagering operations at the beginning of January, straight after Steven Gregg had begun his role as the company’s chairman, but it was considered to be opportunistic with uncertainty over funding.
Entain is advised by Macquarie Capital and Morgan Stanley, while Apollo is working with Jefferies and Tabcorp counts UBS as its defence adviser.
Citi may also be involved with one of the bidders.
Ladbrokes is understood to have been running the ruler over Tabcorp for more than a year, as first flagged by DataRoom in November, while Apollo is understood to have also been looking at Tabcorp for a long time.
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