Tabcorp keeps suitors of units hanging until after June review

Tabcorp’s board is understood to be meeting on June 20 to consider its strategic review, dashing suitors’ hopes of gaining any earlier clues about the future plans for the company.

Both Apollo Global Management and Entain recently sweetened offers for part of the Tabcorp business.

Apollo increased an offer for the wagering, media and gaming services assets to $4bn, from $3.5bn earlier, while Labrokes owner Entain increased a proposal to buy the wagering and media arm to $3.5bn, from about $3bn.

But the understanding is that both groups are unlikely to gain any insight into whether they will be granted due diligence to take a closer look at the business until after the June 20 date.

Shareholders have been lobbying Tabcorp to carry out a demerger of the business since last year, after expressing frustration over the company’s performance since it led an $11bn demerger with Tatts in 2017.

Tabcorp announced a strategic review of the business on March 29, with investment bank UBS on board to provide advice.

As is the case with Woolworths with its Endeavour Drinks liquor business that has attracted private equity interest, most expect Tabcorp to demerge the wagering and media unit, enabling parties to bid for the division once it is a separate entity.

Earlier groups such as The Carlyle Group looked at Woolworths’ $10bn-plus Endeavour business, before the supermarket giant opted to push on with a demerger.

It will be interesting to see if a large number of investors divest the shares in the unit due to environment, social and governance concerns given that Endeavour owns pubs that generate income through slot machines. If shares fall substantially as a result, it may pave the way for a private equity suitor, with Carlyle earlier said to have been the most keen buyer.

A demerger was also used as a defensive strategy when GrainCorp became subject to a $3.7bn buyout proposal by Long Term Asset Partners in 2018 before the bidder walked away.

Private equity parties started circling GrainCorp’s malt operations and the company subsequently demerged what is now United Malt, which continues to be speculated as a private equity takeover target.