Tabcorp and Tatts merger talks back on

Aust

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ralian business news sources are speculating whether a merger between leading gambling operators’ Tabcorp Plc and Tatts Group could be revived as pressure from wagering competitors intensifies.

Australia’s two largest non-casino gambling firms are rumoured to be in talks to create a A$9.34bn betting industry giant to fend off popular overseas online rivals such as William Hill, Ladbrokes and bet365, that are gradually taking market share in Australia.

This is not the first time the operators have engaged in merger discussions. In November 2015, the two wagering giants called off discussions regarding a potential nil-premium merger after failing to reach a deal. Since then Tabcorp’s shares have gained 11.4% while Tatts has fallen by the same amount.

Shares in the two companies were placed in a trading halt on Tuesday morning until market opens on Wednesday “pending an announcement in relation to a potential change of control transaction... that is under consideration”.

Matthew Felsman, a wealth adviser at AAP Securities commented: “The entry of large global operators such as William Hill and Sportsbet could have helped push a deal across the line as they have taken a sizeable slice of the local wagering market.”

Industry commentators are alluding towards a merger of equals, with Australian business analysts predicting favourable merger conditions to be set by the Australian Competition & Consumer Commission (ACCC). Australia’s competition regulator said it would scrutinize the proposal, citing “a range of potential issues and areas of overlap”.

The wagering giants reported a combined profit of A$403m for the 2015/16 financial year. Mathan Somasundaram, analyst at stockbroker Baillieu Holst stated: “They are probably both running out of growth, so put them together and they probably could do savings and on aggregate they might pull out a double-digit growth number.”

Shares in the two companies are expected to resume trading on Wednesday or following the announcement of a transaction.
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