Tabcorp Holdings, an Australian based gaming, wagering and Keno company has confirmed that it has entered into an agreement to acquire Tatts Group Ltd, another Australian based company involved in the gaming, lotteries and wagering markets. Tabcorp is expected to pay A$6.4 billion ($4.9) to complete the acquisition and create a betting giant in Australia whose total value will be more than A$11 billion.

The two companies initially started their discussions in November 2015 about a possible merger but those discussions were shelved as the two companies were unable to agree on the terms and conditions. They have now been able to work out their differences and have confirmed a possible merger subject to regulatory approvals. Should the merger be approved, the new enterprise will be the biggest gambling company in Australia and provide stiff competition to a number of other betting companies targeting the Australian market such as William Hill, Bet365, Unibet and Ladbrokes Plc.

Tabcorp and Tatts decided to go ahead with the merger as the long term goals and strategies for both companies were very similar and a merger would allow the new company to dominate the Australian market offering sports betting, horse racing and greyhound racing with bigger wagering pools. The stakeholders for both companies were also in favor of the merger and it reflected in share prices as Tabcorp shares went up by 1.8 percent to A$4.90 while Tatts rose by 15 percent to A$4.14.

In a statement, Paula Dwyer, head of Tabcorp said “In wagering, combining our two complementary businesses will give us a national footprint and could create a pathway to larger wagering pools. This transaction is expected to deliver significant value for both sets of shareholders, and material benefits to other key stakeholders including the racing industry, business partners, customers and Governments.”

Tabcorp made a filing with the Australian Stock Exchange stating that the merger would result in the country’s racing industry receiving an additional A$50 million each year and A$130 million of EBITDA business improvements and synergies in the first year of the new entity’s operation. The possible merger could take as long as two years to receive all regulatory approvals.

Receiving full approval from the Australian Competition and Consumer Commission (ACCC) could pose significant challenges as the commission chairman Rod Sims stated that the merger will have major implications for the betting industry in the country and pose serious concerns. Before the merger could be officially announced, Sims had stated that there is a strong overlap between the two enterprises and the commission would need to determine if the other online betting operators in the country would be competitive enough against the new entity.

There are more than 2,400 online gambling websites and online casino websites offering services to Australians. A large number of these websites are illegal but the ACCC needs to consider licensed operators such as Betfair, Bet365 and Sportsbet who are ACCC members and will be threatened by competition from the new entity.

 

 

 

 

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