Tabcorp and Tatts have set their names in the in the online gambling industry as the largest bookmakers. These companies are based in Australia and have a very strong customer base. Both the non-gambling firms are planning to merge and are expected to form a business of worth $11.3 billion. No doubt, this deal will be first of its kind and will bring in huge profits for both.
About the Merger
It was in the news recently that Tabcorp Holdings is all set to acquire Tatts Group at the soonest. The company has thought of this merger in order to confront the challenge from its foreign online rivals. The biggest horse racing and sports betting company, Tabcorp has already made a cash sweetener offer to Tatts, the popular lottery operator. Before the declaration of the deal, the company had a 20.8 percent premium to its closing price.
This very merger has come amidst the time when rivals like Paddy Power and Britain’s William Hill have gained a strong market share in Australia right after the deregulation of the gambling licenses. The Chairman of Tatts has mentioned in an interview that the offshore bookmakers have been uniting together to have a strong grip on the domestic market. He further added that the merger between the two companies is sure to develop a much stronger platform for both to survive the competition of international market. After the merger deal has been approved and the merged company will have the total value of $11.3 billion.
On the other hand, the Tabcorp chairman, Paula Dwyer said that bringing both the businesses together in this changing state-of-affairs is going to create a diversified and strong business. It will develop a business that will be well-organized to compete, invest and innovate. The merger will help in competing not only in the Australian market but at an international level too.
The Third Trial
It can be called as the third trial for both Tatts and Tabcorp. It is simply because of the fact that Brisbane based Tatts and Melbourne based Tabcorp have tried merging earlier also too. Since 2006, this is the third time that these companies have tried to merge together. In the last year, the two companies did not agree to the merger due to the fact that the anti-trust regulators blocked the very deal a decade ago. In addition to this, the analysts of Deutsche bank have mentioned that the merger should now be approved. Meanwhile, the competition watchdog will analyze the merger and will then reach to the final verdict.
Consolidation in the Gambling Sector
It is true that the online casino companies and bookmakers are today thinking of mergers in order to face the cutthroat competition in the gambling industry. The fact is that the rules of this industry have become tougher than before with higher taxes. As a result of this, the online casinos have to remain at par with the competition and use the state of the art technology for smartphone gaming. Some of the biggest examples of European mergers include Paddy power merging with Betfair and Ladbrokes. When it comes to the merger between Tatts and Tabcorp, the risk profile of Tabcorp will improve significantly with the flourishing lottery business of Tatts. A wealth adviser at APP Securities has further said that the merger will be big enough to face the international competition and with a $500 million buyback, it is going to create a strong balance sheet for sure. Therefore, the merger is still expected and both the companies are waiting to reap its benefits in the future.