The drum beats are getting louder that Tabcorp chairman Steven Gregg will soon announce a demerger of the company’s wagering and media arm, a move that could both unlock value for Tabcorp shareholders and spark some additional corporate activity.
Mr Gregg has Tabcorp chief executive David Attenborough working on a strategic review after receiving a $3bn offer from Entain, the owner of Labdrokes and Neds in Australia, earlier this year.
Tabcorp shareholders would receive shares in the new entity and maintain their stake in what is left: a strong lotteries arm. A win-win situation could ensue: the lotteries business gets rerated and takes off, and a rejuvenated wagering arm starts to recover from years of losing market share to digital-savvy rivals.
Digital betting pioneer Matthew Tripp is said to either want to emerge as a spun-out Tabcorp boss, but would probably need an incentive in the form of a decent stake in the new business, or a payday from wrapping Tabcorp up with ASX-listed BetMakers, which has him on a dealmaking incentive contract. He could also need funding for such a deal, potentially from the debt markets or a private equity outfit such as Ben Gray’s BGH Capital. He would also need to convince BetMakers shareholders, with the wagering data firm now approaching a $1bn market capitalisation.
Any Tabcorp demerger could spark a renewed bidding war with Entain, private equity Apollo Global Management or other parties emerging. Tabcorp’s media assets could also be attractive to outside parties.
The timing is also interesting for the Victorian government and racing authorities in the state. Tabcorp is in a joint venture with Racing Victoria in which it has exclusive rights to retail betting outlets until 2024, a contract that shores up funding for the industry. It is a big deal but so-called tote betting is on the wane, which means less money from the joint venture is flowing to racing as more punters bet on their phones.
Racing executives do not want the status quo to remain in place and Racing Victoria boss Giles Thompson has described the licence as the most important piece of business for authorities right now.
Initial expressions of interest for the next licence are due within a couple of weeks.
Tabcorp will lob a bid, and others such as Entain and rival Sportsbet will also take a look.
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