Australian betting and lottery operator Tatts Group has rejected a consortium’s takeover bid in favor of Tatts’ proposed merger with rival Tabcorp Holdings.
Tatts issued a statement on Friday that the A$7.3b bid by Pacific Consortium – a group comprised of Macquarie Group, private equity giant KKR, Morgan Stanley’s North Haven Infrastructure Partners and local investment group First State Super – was “predicated on a number of key assumptions that are either incorrect, inconsistent with Tatts’ current expectations or unknown.”
Tatts board believes the total value offered by the consortium is “not superior to the proposed Tabcorp merger.” Tatts said it would make the same determination even if the consortium “were to update its assumptions with no consequential impact on its key terms and conditions.”
The consortium’s primary interest was in Tatts’ mainstay lotteries business, but Tatts said the consortium’s valuation of the lottery biz was “inadequate.” The consortium planned to spin off or offload Tatts’ UBET wagering business to a “strategic buyer,” but Tatts claimed the consortium’s “assumed trading and control price estimates” for the wagering business were “overly optimistic.”
Tatts also announced Friday that an “unfavorable jackpot sequence” – only 15 jackpots over $15m in the current fiscal year versus 24 in the same period last year – meant its FY17 lotteries earnings were down 13.8% year-on-year. Tatts said this decline meant the consortium’s earnings assumptions for the lottery business were “likely to be too high.”
Analysts don’t expect the Pacific Consortium’s ardor to be dimmed by the Tatts board’s rebuff, with suggestions that the group would come back with a revised offer, which could identify an international bookmaking firm keen on taking on Tatts’ wagering unit.
