The quasi sale of the NZ TAB that could be worth about $NZ1bn over time is now believed to be imminent, with Entain understood to have been provided with so called “black box” due diligence information to come forward with a proposal.
Black box due diligence, where all information is offered to a suitor on a company or asset to determine whether to make an acquisition, is typically only offered to a preferred bidder.
Based on the level of due diligence being offered at the late stage, sources expect a transaction to be close.
It is understood that the transaction involves an upfront payment of $NZ250m and a profit sharing arrangement over time.
Sources have been pointing to Entain as the most likely acquirer of the offering, and it is believed to have fended off competition from Tabcorp and Sportsbet.
The three groups were understood to have made their final presentation to racing officials in Auckland on Monday.
DataRoom revealed last week that investment bank Barrenjoey had been mandated to work on options for the TAB across the Tasman.
It is understood that Entain, which owns Ladbrokes, had been in talks with the New Zealand TAB for months before the process kicked off, but did not comment on the latest situation.
This column reported in February last year that Entain was in discussions to embark on a deal for the New Zealand TAB.
It is believed that on the table is a move to outsource the wagering operation to a party over 25 years, resulting in an up front payment, with profits to be shared between the racing industry and New Zealand government.
The TAB is operated by the government body, the New Zealand Racing Board (now called TAB New Zealand) which also controls Trackside TV, which broadcasts across the country.
TAB operates at least 500 outlets throughout New Zealand as well as on-course tote terminals, internet, phone betting and touch tone wagering channels.
It offers a wide range of totalisator and fixed-odds betting products where just over 80 per cent of the totalisator betting dollar is returned to the customer and the rest goes to racing and sporting codes after tax and NZ Racing Board costs.
Entain in 2021 offered $3.5bn for Tabcorp’s wagering and media unit but was rebuffed by the Australian gambling group. Tabcorp has since demerged its lotteries business, now consisting of only a wagering arm.
Sources say globally, Entain has been under pressure to carry out acquisitions.
When it vied for Tabcorp wagering, it was advised by Macquarie Capital and Morgan Stanley.
New Zealand’s Racing Industry Transition Agency has been moving to drive down costs and outsource the TAB to lift efficiency.
It comes after a report into the New Zealand Racing Industry launched in 2018 by John Messara that recommended sweeping industry changes.
The Messara Report, commissioned by the racing minister, recommended racetrack closures and an outsourcing of TAB operations.
Major synergies exist for a group owning more than one TAB because betting is dependent on the same systems and IT platforms that support the business.
Marketing also becomes an easier exercise.
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