Tatts Group, the leading lottery operator in the Australian market has just been at the receiving end of a takeover bid, based upon reliable information released by the Reuters group. According to the Reuters report, a group of investors including Macquarie Group Ltd and leading global investment company KKR has made an offer of around Australian $7.3 billion (approximately US $5.47 billion) to buy the lottery operator.
This move can spell bad news for the acquisition attempt on Tatts that has been mounted by leading Aussie bookmaker Tabcorp Holdings Ltd. Stockholders of the lottery company will definitely want to consider the new offer to see if they can get a better deal under it. Tatts shareholders stood to gain very much from the earlier deal being worked out since they would have got 0.8 Tabcorp shares and 42.5 cents for each of the Tatts shares they had.
In an interesting development, the Macquarie and KKR offer is believed to have a big advantage over those from other Tatts suitors because partners of First State Superannuation Scheme and Morgan Stanley Infrastructure do not require approval from the Australian Competition and Consumer Commission. The Tabcorp bid does not have any such advantage and its bid is currently undergoing detailed scrutiny by the regulator body.
The Tabcorp board seems to have jumped the gun when it released a statement in October to say that its acquisition of Tatts was in the bag. In fact, the company also went on to say that the merged entity would be a major force in the gambling industry in Australia and that the newly created gaming giant would be able to provide good competition to its competitors located abroad. However, the Tabcorp celebrations definitely seem to be premature given the excitement that the new offer is generating. There is also a growing realization that the lottery business occupies a very important space in the gambling industry in Australia.
Charlie Green, Director of Hunter Green Institutional Broking and a shareholder at Tatts said that the new development was pretty much like an auction and would help enhance the value and image of the lottery business in Australia.
However, the consortium’s bid hasn’t exactly been received with enthusiasm by all parties. Gabriel Radzyminski is managing director of Sandon Capital, an activist investor group and also a shareholder of Tatts Group. He is of the opinion that the consortium’s bid will not be successful and that it could be a way to see whether Tabcorp is seriously interested in the lottery business or not. Incidentally, Tabcorp had agreed to pay a 20% premium for the lottery company’s shares. Radzyminski went on to say that the Ontario Teachers’ Pension Plan should also make a bid for Tatts via its UK lottery company Camelot Group.
Tatts shareholders will have to consider the offers with a great deal of care, not just for short term gains but also for the long term advantage. There are indications that Macquarie will split up Tatts to retain the lottery business which is doing very well and get rid of the wagering verticals that are not performing well.
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