Tabcorp considers sale of gaming services company Intecq

The wagering giant is understood to have considered offers to sell all or part of its Intecq business, acquired for $128m eight years ago, as part of a plan to streamline operations.

Tabcorp has looked at streamlining its business to focus on the lucrative wagering aspects of its operations. Picture: Mark Evans/Getty Images

Tabcorp is understood to have considered offers to sell all or part of its gaming services company Intecq as part of a plan to streamline its business and try to remain relevant against more nimble corporate bookmakers.

Intecq has two main operations. The one believed to be for sale provides gaming and promotional management systems to pubs, clubs and casinos.

The other business, which Tabcorp is keeping, is a monitoring and compliance business for Queensland gaming.

Tabcorp paid $128m for the then ASX-listed Intecq almost eight years ago and is believed to have held talks with Tasmania’s Federal Group – who are not buying the business – as well as its former management about a buyout of the gaming services unit.

Selling Intecq would give Tabcorp cash ahead of a few years of high expenditure. The gambling behemoth is in the mix for the $1bn West Australian TAB licence and is also trying to renew the Victorian retail licence, which holds until 2024.

Tabcorp has been very reliant on exclusive state government contracts and bricks and mortar shops to retain its profitability while competing against online bookmakers such as Ladbrokes and Sportsbet. In return it has provided massive funding to the racing industry.

Last month the Queensland government introduced a new 5 per cent levy for online bookmakers, taking their effective point of consumption tax to 20 per cent, and Tabcorp successfully lobbied the NSW government to increase its POC to 15 per cent for online bookmakers.

Not surprisingly, Tabcorp, which lobbied hard for both these changes, was pleased with the result. NSW will also provide Tabcorp – which has an exclusive retail outlet licence in NSW that helps fund the racing industry – with $30m in offset payments over two years.

Investors Mutual portfolio manager Daniel Moore believes the changes to taxes on online bookmakers and reducing race fields fees for Tabcorp that state governments have made or are considering may give the company a significant profit boost.

“If NSW and Victoria adopt something similar to Queensland then the upside is 20-30 per cent in the next two to three years,” said Mr Moore, who holds $60m in Tabcorp shares.

But while making online rivals pay more tax might please Tabcorp, it doesn’t take away from the fact that the company is still considered slow-moving and bureaucratic, with a vastly inferior gaming app, substandard VIP services and less catchy products.

There is now a great deal of pressure on Tabcorp to produce a clear strategy for growth following the spin off of The Lottery Corporation in May.

Change has been badly needed. Tabcorp’s betting app is operating with technology that is 10 years old. It is little wonder that online bookmakers have taken so much market share, particularly during Covid-19 lockdowns when punters were at home betting on their phones and could not access Tabcorp retail outlets or place a bet in pubs and clubs.

The company is rolling out a refreshed betting app that will launch in time for Spring Carnival at the end of August, the most lucrative time of the year for the sector, starting with the Memsie Stakes at Caulfield on August 27 and peaking with the iconic Melbourne Cup in early November.

Some have questioned whether Tabcorp chief executive Adam Rytenskild has been left as a placeholder at the $2.4bn wagering and media business, ahead of a potential takeover bid.

Last year, British wagering giant Entain, which owns Ladbrokes and Neds, offered $3.5bn for the entire Tabcorp business, which at that point still included the lottery operations.

BetMakers then upped the ante with a $4bn bid, but walked away when Tabcorp instead announced plans to demerge.

However, it remains unclear whether Entain or others will return, or watch to see if the company continues to lose market share and declines in value.

However, Mr Moore said his firm’s market research had revealed “surprisingly” solid support from the racing industry for Mr Rytenskild. “There is a cultural change that has taken place,” Mr Moore said. “We haven’t had positive feedback on management at Tabcorp for a long time and so that has really got us interested.”

Mr Moore said it was “not a surprise” that Tabcorp would be looking to sell the Intecq gaming services business and Investors Mutual was supportive “at the right price”.

Analyst consensus revenue for gaming services ranges from $128m to $230m for full-year 2023, which shows a lack of clarity from management on how the business is performing.

In a research note, Evans and Partners alluded to a change for this business.

“Tabcorp intends to pivot Gaming Services towards the lower capital-intensity integrity services where they see growth opportunities. Further information on gaming services will be provided in the ‘future’,” said the Evans and Partners note.

Tabcorp declined to comment.