Macquarie Capital ‘working with Ladbrokes’ on Tabcorp arm

Different types of investors are thought to exist for each division. (Ross Holburt/Racing Photos via Getty Images)

Investment bank Macquarie Capital is believed to be working with Ladbrokes, as the British company confirmed speculation that it was the mystery bidder for Tabcorp’s wagering arm.

Investment banks Morgan Stanley and Citi are also said to have been around the Tabcorp situation, say sources, likely working for interested parties.

Tabcorp counts investment bank UBS as its adviser.

Ladbrokes owner, London-listed global betting firm Entain, said last night it had made a non-binding indicative offer to acquire Tabcorp’s wagering and media business, confirming talk in the market it was showing interest.

However, it may not be the only suitor with private equity firms also likely to pursue the company, with New York-based Blackstone one name that market experts believe makes some sense.

It comes as DataRoom revealed on Tuesday that Tabcorp was understood to have received a proposal to break up the $9bn betting company.

The offer was received by the board about two weeks ago, say sources.

It is understood that the plan involves a demerger of the lotteries arm and returning the business back to shareholders with some cash, while taking ownership of the wagering division.

Tabcorp confirmed later that it had received a number of conditional approaches and proposals in relation to a potential transaction involving Tabcorp’s Wagering and Media business.

British betting company Ladbrokes has been running the ruler over Tabcorp in the past 18 months, as reported by DataRoom in November.

Buying the wagering business would add 30 per cent to Ladbrokes’ market share, say analysts.

But some question whether Ladbrokes would be keen to buy the business that has been heavily impacted by the lock downs last year amid the global pandemic.

Ladbrokes is owned by the company known as Entain and that has received a takeover proposal by MGM Resorts, which recently shelved those takeover plans.

Tabcorp’s Wagering and Media unit generated earnings before interest, tax, depreciation and amortisation of $371m, down 19.5 per cent as it continued to invest in its digital transformation and integration of the UBET business.

The media component of the business is the Sky Racing channel, which has rights to many racing events throughout Australia.

The other major wagering player in the Australian industry is Flutter Entertainment, the holding company created by the merger of Paddy Power and Betfair, and the later acquisition of The Stars Group.

Its brands include BetEasy and Sportsbet.

British-based gambling group William Hill was bought in September by American hotel and casino entertainment company Caesars for US$3.7bn so some in the market are sceptical that it is the buyer of the business.

Major private equity firms that have a history in investing in gambling companies include TPG Capital and others such as CVC Capital Partners and Permira.

Another potential investor could be BGH Capital, run by former TPG Capital executives Ben Gray and Simon Harle.

Among Tabcorp shareholders believed to be keen to see the more lucrative lotteries part of the business demerged include Tanarra Capital, along with Sandon Capital and Perpetual.

A Tanarra Capital spokesman said a move would improve Tabcorp’s position for growth of the lotteries business while industry players would see opportunities for a turnaround of the wagering arm.

Different types of investors are thought to exist for each division.