Tatts Group’s plan to form an Australian betting behemoth with rival operator Tabcorp Holdings is being challenged yet again.
This time, the Pacific Consortium—a group backed by U.S. private equity firm Kohlberg Kravis Roberts (KKR)—has returned to present a multi-billion-dollar spoiler to the planned merger between the two Australian gambling operators.
Australian Securities Exchange-listed Tatts confirmed on Wednesday that it had received a A$7.2 billion (US$5.4 billion) takeover bid from the consortium, consisting of KKR & Co, Morgan Stanley, Macquarie Group, and First State Investments.
The new proposal offers A$4.21 (US$3.17) per Tatts share and may include a A$0.25 per share special dividend, which will be paid immediately prior to any deal being implemented. The consortium’s offer is all-cash, which does not require regulatory approvals.
Tatts rejected Pacific Consortium’s first proposal in December on grounds that the group’s cash and share offer was not superior to a tie-up with Tabcorp, which would create a A$11.3 billion Australian gaming giant.
Respective boards for Tabcorp and Tatts had already unanimously recommended sealing the deal between the two gambling operators. The deal, which expects to be complete by mid-2017, will be implemented via a Tatts Scheme of Arrangement that will see Tatts shareholders receive 0.8 Tabcorp shares plus 42.5¢ cash for each Tatts share. The price represents an 18.4% premium to the one-month average price of Tatts shares. Tatts shareholders will control 58% of the enlarged entity, with Tabcorp’s shareholders holding the remaining 42%.
But on Wednesday, Tatts directors said in a statement to the ASX that it “is undertaking a full analysis of its key terms, underlying financial assumptions and conditions.”
“Once this review is complete, an update will be provided to the market,” Tatts said.
Tatts’ shares jumped 1.61 percent to A$4.42 following Wednesday’s announcement, while Tabcorp fell 0.63 percent to A$4.70.
