After a month to consider, Tabcorp has turned down a $3bn bid by Entain for the company’s wagering and media division, arguing that the bidder has underestimated the company’s actual value.
Tabcorp Says No to $3bn Entain Bid
Tabcorp has formally rejected a $3 billion bid by Entain this morning and has launched a broad strategic review looking into the current state of the business and a potential sale later down the road.
Tabcorp chairman Steven Gregg explained that the review was necessary because of intensifying rumors that the company was looking to sell its wagering business or demerge it from the lottery operations.
As to the bids the company received, he was diplomatic and simply said that they were a bit on the light side, confident that Tabcorp could elicit a much stronger response from interested parties.
With regulated sports betting businesses in Australia not as numerous as in the United Kingdom, acquiring a licensed operator means a lot to third-parties trying to gain a foothold in the country’s gambling market.
Gregg argued that it was necessary to “clear the air” and set the record straight. He commented on Tabcorp shareholders’ ongoing demands who have been asking for a split from the lotteries business.
“We are very conscious of our shareholder base and what they want. Most of the shareholders are very considered, and they understand often there’s a lot of complexity to work through,” Gregg continued.
Gregg explained that none of the bidders for the betting business has come with an offer that tempted Tabcorp to consider pushing through with a deal. Entain is far from the last company to seek a bite out of Tabcorp, though.
More Businesses Looking to Buy
Apollo Global Management and Matthew Tripp are both interested parties that may be looking to acquire the wagering division. The Murdochs are supposedly also looking to enter what is one of the most vibrant betting markets in the world.
Australia’s estimated betting market’s size amounts to $4.7 billion annually. Meanwhile, Tabcorp’s review should take anything between 12 and 13 weeks, meaning that bidders may need to put their ambitions on hold, at least temporarily.
Gregg argued that the company would take numerous factors into consideration, including weigh performance, valuation, and execution risk, all in the hopes of getting shareholders the best results.
Citi analysts claim that Tabcorp’s wagering and media arm needs a prompt solution and that even a demerger would not come in time as it usually takes between six and 12 months, more than the company has to cushion some of the financial impacts the pandemic has had on it, Citi argues.
However, Tabcorp’s business seems to be doing fine with revenue boosted by lottery and wagering operations.
In other words, Citi expects Tabcorp to sell-off sooner than demerge its division. However, as Gregg notes, Tabcorp is a little more complicated than people think, and we will have to wait and see what happens next.
It’s not unlikely for Entain to try and reacquire the business. Earlier this year, Entain faced a similar dilemma, trying to buy Enlabs. However, Enlabs shareholders turned down the offer arguing Entain had underpaid, which eventually made Entain reconsider its bid.