Tabcorp shareholders overwhelmingly approve $11bn demerger scheme

Shareholders have voted in favour of hiving off Tabcorp’s lotteries and keno business into a new listed entity trading as The Lottery Corporation.

Incoming Tabcorp lottery CEO Sue van der Merwe. Picture: Dan Peled

Tabcorp shareholders overwhelmingly approved an $11bn demerger scheme for the gaming giant on Thursday despite the lingering threat of possible legal action aimed at derailing the plan.

The split, which would be one of the biggest ASX deals this year if it wins court approval, will see Tabcorp hive off its lotteries and keno business into a new listed entity trading as The Lottery Corporation Limited.

It would operate a group of well-known lottery games such as Powerball and Oz Lotto.

Tabcorp intends to continue overseeing its existing wagering, media and gaming services businesses, including those trading under the banners of TAB, Sky Racing and MAX.

Tabcorp chairman Steven Gregg

But Racing NSW last month warned it would consider legal action to thwart the demerger, which was unanimously backed by the Tabcorp board and independent expert Grant Samuel.

Racing NSW chief executive Peter V’landys maintained that the split would be detrimental to the industry since Tabcorp’s struggling wagering division might direct a reduced amount of funding to racing bodies.

 “Unless (Tabcorp) come to the party with some guarantees and arrangements … we will consider all our options,’’ Mr V’landys said.

“It’s no secret that Tabcorp’s wagering division is running poorly and that they are trying to offload a sinking ship.”

While regulators must sign off on parts of the demerger, Tabcorp maintains that it does not need approval from Racing NSW or other racing groups.

Tabcorp chairman Steven Gregg welcomed the strong support for the scheme of arrangement, which was backed by nearly 93 per cent of shareholders.

“We are pleased to have received shareholder approval for the demerger of The Lottery Corporation from Tabcorp,’’ Mr Gregg said.

“This is an important milestone in repositioning the Group’s portfolio and setting up Tabcorp and The Lottery Corporation for future success.’’

The Supreme Court of NSW is scheduled to hold its first hearing on the plan late next week.

If approved, Tabcorp said shares in The Lottery Corporation will start trading on the ASX on a deferred settlement basis on May 24. The demerger would then be implemented on June 1.

Tabcorp, which merged with the Tatts Group in 2017, first conducted a review of its strategic options in the first half of last year.

With six operating businesses spread across three divisions, it determined that a demerger was “the most certain and timely path to maximise value for Tabcorp shareholders, with lower regulatory impediments’’.

The independent expert report by advisory firm Grant Samuel said Tabcorp’s wagering and media arm alone could have a value of $2.1bn to $2.7bn.

That is substantially below the bids of between $3bn and $4bn from multiple suitors that Tabcorp rejected last year, including London-based Entain, BetMakers Technologies and private equity firms.

While Grant Samuel described the likely market price as low, it also noted that the demerger would probably increase the likelihood of one or more takeover offer for the wagering business.

But Mr Gregg has previously cautioned that significant regulatory hurdles make selling the wagering division difficult.