TAH Tabcorp Holdings Limited

   By Mike Cherney 
 

SYDNEY--A group of four investors, including private-equity firm KKR & Co. LP (KKR) and Australian bank Macquarie Group Ltd. (MQG.AU), has offered to buy wagering firm Tatts Group Ltd. about two months after that company agreed to sell itself to rival Tabcorp Holdings Ltd. (TAH.AU).

The bid by the Pacific Consortium values Tatts, which holds several lottery licenses in Australia and owns over-the-counter betting shops, at up to 7.34 billion Australian dollars (US$5.5 billion).

The new offer threatens to derail Tabcorp's attempt to acquire Tatts' lucrative lottery business amid increased competition from online platforms. It also highlights the growing interest in Australia's betting industry, where slot machines are widespread in pubs and clubs.

The new offer proposes to split Tatts' wagering and gaming business from its lottery business and values Tatts at between A$4.40 and A$5.00 a share. Tatts shareholders would receive A$3.40 in cash plus one share in the wagering unit, which would be listed separately on the Australian Securities Exchange or sold.

Tatts said it hasn't yet formed a view on how the new proposal stacks up to Tabcorp's previous offer. The company's board plans to assess the proposal and will provide an update on the review as soon as possible. The company said it would continue to recommend Tabcorp's previous offer while it assesses the new bid.

Other investors in the Pacific Consortium include Morgan Stanley, as an adviser and manager to North Haven Infrastructure Partners II LP, and Australian pension fund First State Superannuation Scheme.

Under Tabcorp's offer, Tatts shareholders would receive 0.80 Tabcorp shares and 42.5 Australian cents (US$0.32) in cash for each share held in Tatts. The implied value of A$4.34 per Tatts share was a 21% premium over Tatts' closing price prior to the deal being announced.

Tabcorp runs a network of retail wagering outlets and the deal for Tatts would help Tabcorp diversify its revenue. Most of Tabcorp's revenue currently comes from its betting business, but adding Tatts' less volatile lottery operations would provide Tabcorp with additional stability, analysts say.

Last month, Tabcorp said it took an approximately 10% equity stake in Tatts, a move that investors said was designed to give Tabcorp more leverage in fending off possible rival bids. Tabcorp said that transaction was "intended to help facilitate the proposed combination."

Australia's gaming sector has drawn attention from overseas players in recent years, as companies such as Ladbrokes Coral Group PLC (LCL.LN) and William Hill PLC (WMH.LN) have opened online betting platforms. Wagering activity at Tabcorp's retail locations has fallen amid the new competition from online players.

Reach Mike Cherney at mike.cherney@wsj.com

(END) Dow Jones Newswires

December 13, 2016 19:13 ET (00:13 GMT)

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