Written on the 11 September 2017 by David Simmons


GAMBLING giant Tabcorp (ASX: TAH) expects to complete its $11 billion merger with rival group Tatts (ASX: TTS) on November 1.

Melbourne-based Tabcorp says it is confident the deal will be completed, with Tatts shareholders scheduled to vote on the scheme of arrangement on October 18, before a second court hearing into the merger six days later.

"With substantially all pre-implementation regulatory approvals now in place, we look forward to continuing to work with Tatts to successfully complete the transaction," says Tabcorp chairman Paula Dwyer.

The merger process has been highly fraught, with the ACCC deciding to intervene several times, and rival Crown Bet also challenging the merger.

In June, the Australian Competition Tribunal decided to allow the merger to go ahead, but both the ACCC and Crown Bet have appealed this decision.

Tabcorp expects the merger to deliver at least $210 million in annual earnings from business improvements, tech integration, corporate cost savings, and other consolidations.

It will take at least two years to fully integrate the two companies, according to Tabcorp.

In early August Tabcorp reported a $20.8 million full-year net loss, a result heavily impacted by the ever-delayed merger with Tatts.

Although the gambling group generated a total of $2.23 billion in revenue, its overall loss comes in stark contrast to its previous $169.7 million profit.

Tatts Group had a similarly poorly performing year, posting a full year net profit loss of 5.7 per cent and a revenue decline of 8.4 per cent after absorbing some of the cost of its merger with Tabcorp.

The gaming company's net profit for the financial year to 30 June 2017, came in at $220.5 million which is down from $233.7 million in the 2016 financial year. Revenue declined from $3.03 billion in 2016 to $2.78 billion in FY17.

Following this morning's announcement shares in Tabcorp are up 1.24 per cent to $4.10, and Tatts Group is also up by 1.02 per cent to $3.95.

Meanwhile independent advisory firm Grant Samuel says Tatts shareholders are getting a fair deal in the proposed merger with Tabcorp.

In a Tatts scheme booklet released on Monday, Grant Samuel says the deal is in the best interests of Tatts shareholders in the absence of a superior proposal.

"Based on share prices over the three months prior to the announcement of the scheme on 19 October 2016, Tatts shareholders are contributing approximately 56-58 per cent of the value but are receiving a 61 per cent share of the value," Grant Samuel says.

"In effect, Tabcorp is 'paying away' synergy benefits arising from the merger to Tatts shareholders to enhance the attraction of the transaction to Tatts shareholders."

The advantages and benefits of the scheme for Tatts shareholders outweigh the disadvantages, risks and costs, according to Grant Samuel. 

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Business News Australia

Author: David Simmons





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