Tatts chair Boon spruiks ‘industrial logic’ of Tabcorp merger

Tatts chairman Harry Boon believes the $11.3 billion merger with Tabcorp makes ‘industrial logic’.

Tabcorp chairwoman Paula Dwyer and Tatts chairman Harry Boon. Picture: Stuart McEvoy

Tatts chairman Harry Boon believes the $11.3 billion merger of the nation’s leading lotteries, wagering and gaming businesses makes “industrial logic” in the wake of vast upheavals in the sectors, although he has conceded his own shareholders would like to see a more healthy Tabcorp share price as a vote on the deal approaches.

Mr Boon, speaking to The Australian from Japan on Sunday where he is on business, said Tatts shareholders had the opportunity to share in hundreds of millions of dollars in value uplift if the merger goes ahead, which could deliver as much as 55c per Tatts share in extra wealth for investors.

Since the scrip and cash offer deal was announced last October, shares in Tabcorp have sunk by 20 per cent, eroding the value of the merger, which has irked Tatts investors but Mr Boon said the tie-up still made “overpowering logic” when looking at the numbers and the $130 million a year in targeted synergies savings.

“I’d be naive to say that our Tatts shareholders are as excited today about the share price of Tabcorp as they were last October, and I suppose the summary we had then was a resounding positive reaction from all our shareholders to the deal,” Mr Boon said.

“And the reaction we are getting now as we go around with the end-of-year results, with the roadshow on at the moment, the reaction now we get is we would really like to see the Tabcorp share price move north before we have to vote, so that we can feel better about it.”

Shareholders in Tatts will vote on the merger on October 18 with an extensive scheme booklet issued on Friday with an independent expert labelling the proposal “fair and reasonable”. Tatts shareholders have been offered 0.80 Tabcorp shares plus 42.5c cash for each Tatts share held. When the deal was launched in October it represented a 20.8 per cent premium, but that has faded as Tabcorp shares have slipped from $5 to near $4.

Mr Boon said he and Tabcorp chairwoman Paula Dwyer believe that the combination of both businesses made “industrial logic” as both wagering businesses faced the threat of highly unregulated corporate bookmakers that pay little tax and even less funds to the racing industry.

This was bolstered by the hundreds of millions of dollars in savings that could be made, which would flow to shareholders.

“We in our wagering business have been suffering, as have Tabcorp in their wagering business, from corporate bookmakers who are all registered in the Northern Territory, pay minimal licence fees and minimal taxes.

“We and Tabcorp are heavily regulated because we have state by state licences, but we cannot offer a national tote or deals as corporates can. The opportunity to build a national tote is a very strong countermeasure to those corporates.

“Paula Dwyer and I call it the industrial logic of putting Tatts and Tabcorp together and extracting those cost savings synergies, hundreds of millions of dollars, it’s overpowering logic … do the numbers and it makes sense.”

The publication of the scheme booklet would help focus the thinking of shareholders on the critical issues around the merger, namely Tatts shareholders’ ability to share in the savings from the tie-up as opposed to a “take the money and run” offer pitched by a Macquarie-led Pacific Consortium that had offered Tatts investors $4.21 cash per share with no scrip.