Australian listed wagering company Tabcorp is understood to have offered between $600m and $800m for the Western Australia TAB before the state government pulled the sale process.
The Western Australia government announced on Monday night that its sale process for the WA TAB had been terminated, and the asset would be retained by the state.
A sale process for the state’s TAB – the only left in the country to be privatised – has been running for several months through Ad Astra Corporate Advisory.
Final bids were submitted in August.
The final parties in the competition were Tabcorp, the Matthew Tripp-led venture Betr and Ladbrokes owner Entain.
It is understood that Betr had submitted an offer slightly higher than $1bn for the WA TAB, but was unable to obtain funding for its offer.
There has been a suggestion that Entain also offered around $1bn early on, but had withdrawn its offer.
Mr Tripp, who invests in the ASX-listed BetMakers Technology Group, launched Betr on October 12 in a partnership with News Corp Australia – the publisher of The Australian – and Las Vegas-based Tekkorp Capital, where the ownership is split equally between the three parties.
The proceeds of the TAB sale were to fund the state’s racing industry, and the government’s future funding commitments depended on receiving a sale price of about $1bn.
But an offer below that price would have meant that the WA government would not have been able to meet its funding obligations to the racing industry.
For that reason, the government opted to retain the TAB.
Tabcorb, which is run by Adam Rytenskild, has been trading at about 6 to 7 times its earnings before interest, tax, depreciation and amortisation and its share price levels have limited its ability to pay up for the asset.
The WA TAB generates about $100m of annual earnings before interest, tax, depreciation and amortisation.
The process was first underway in October last year after being halted due to Covid-19.
The government altered the structure of the sale where previously, the price to be paid was only about $300m, but the buyer of the TAB would have been required to hand over a sizeable portion of the TAB’s annual cash flow to the racing industry.
With the $1bn price tag, the owner could retain all the cashflow.
Tabcorp is Australia’s largest wagering group and already operates TABs throughout the country except Western Australia, and it was the favourite to win the contest.
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.
Now, Tabcorp’s focus will be retaining the wagering licence from the Victoria government.
Its TAB licence is up for renewal in 2023 and a process is underway to select the licence holder.
In Victoria, the licence is currently held in a 50-50 joint venture between Tabcorp and the racing industry.
But the Victoria licence renewal provides an opportunity for a change to those terms.
Shares in the $2.2bn Tabcorp rallied more than 13 per cent in Tuesday morning trade to 98c, suggesting the market liked Tabcorp’s discipline when it came to not paying up for the asset.
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