Private equity firm reiterates $3bn-plus offer for Tabcorp assets

Fresh details have emerged about the contest playing out behind the scenes amongst parties keen to buy parts of the $9.93 billion Australian betting company Tabcorp. Photo: Claudia Baxter / The Queensland Times

Fresh details have emerged about the contest playing out behind the scenes amongst parties keen to buy parts of the $9.93 billion Australian betting company Tabcorp.

The understanding is that the valuation of a cash bid put forward in recent weeks by private equity firm Apollo Global Management for all components of the company except its lotteries division sits at somewhere between $3bn and $3.5bn.

Apollo, now known to be working with law firm Gilbert + Tobin as well as Jefferies, is said to have recently reiterated its bid to the Tabcorp board.

It comes after DataRoom revealed this week that Ladbrokes’ British parent company Entain is offering $3bn cash for the Tabcorp Wagering and Media division, whilst keeping the door open for a potential alternative partial scrip offer.

The understanding is that the Tabcorp board has aspirations to achieve a price of at least $3.5bn for the Wagering and Media unit.

Apollo is also offering to purchase Tabcorp’s gaming division, which is estimated to be worth about $500m, along with the Wagering and Media operation, for which Citi analysts recently said could be worth up to $3bn.

However, market experts believe that selling the gaming division, which leases, operates and monitors Australian gaming machines, would be no easy feat for Tabcorp.

Fetching a price around the $500m for the unit in isolation would be challenging, hence the reason for a bid of under $3.5bn for the two units collectively.

The wagering and gaming division have the same technical resources and share the same services team.

Tabcorp, advised by UBS, is handing down its half year profit result on Wednesday and in an environment where bidders are doing battle for parts of the business, it is expected to be closely watched, with some anticipating the announcement of a demerger.

This follows approaches for the wagering and media unit from at least three buyers.

As well as Entain, advised by Morgan Stanley and Macquarie Capital, and Apollo, a third party, Matthew Tripp, had approached the board in January with a proposal to buy the division with private equity backing.

But the understanding is that it came at an opportunistic price with uncertainty surrounding funding.

Mr Tripp was known to be an interested bidder last year, as first flagged by The Australian.

While Entain is seen as having solid credentials to run the Tabcorp unit and that a deal would create strong synergies for the global gaming giant, a plan to buy the wagering arm may face opposition from the Australian Competition and Consumer Commission.

A purchase by any party would also need the blessing of the Australian racing industry.

But Apollo is also no stranger to the betting industry.

The company in December purchased Italian sports betting and digital gaming business Lottomatica and made efforts to purchase William Hill’s European unit late last year after the company was sold to bookmaker Caesars Entertainment.

The private equity firm has a track record of buying only stakes of companies.

In Australia during 2014, it purchased a 50 per cent interest in the services unit of Leighton Holdings (now CIMIC) in a deal that valued the unit at $1bn.

Later, Apollo explored a deal to buy CIMIC’s mining services operation Thiess before later walking away.

Some Tabcorp shareholders are believed to be eager for the company to announce a demerger of the wagering arm to extract greater value from its lotteries division.

But some market participants say such a move would not come without risks, with questions surrounding the company’s earnings outlook on the back of upcoming negotiations with Victoria Racing to retain the wagering and betting licence and the winding down of the Job Keeper government subsidies creating industry uncertainty.

Some also say it is worth remembering that in 2019, suitors for Graincorp’s malt division retreated from the target once the unit was spun off from the country’s largest grain handler.