Tabcorp Holdings out of Australia just reported that its lottery operations helped the gambling company report an increase of 7.6% in its earnings, with a net profit of around USD$245.9 million. That success helped give a boost while its gambling operations declined, which would make the idea of Tabcorp moving its lottery options into a separate entity ludicrous. That is the affirmation of 
CEO David Attenborough, who asserts that rumors of such a move are “complete nonsense.”
Tabcorp’s lottery and keno operations provided 52% of the company’s corporate revenues in its most recent year. In recent years, they have only accounted for around 40% of the revenues. As the lottery operations increase and other wager businesses decrease, some shareholders have tried to push Tabcorp into a demerger.
Jamie Nicol of the asset management firm DNR Capital believes that the action would build a stronger company. He told the Australian Financial Review (AFR) a few weeks ago, “We think a demerger makes sense. They haven’t acted fast enough to extract synergies. Demergers allow management teams to be more focused on managing their business.” However, if that were the case, every corporation would break up its business into individual units.
Perpetual, another investment fund, has also been pushing the company to separate its businesses. Attenborough told AFR that such a move would damage the company’s long-term value and market proposition, as well as undo the work that has been seen to advance the company’s revenue. He adds, “To think that it’s better separated is … absolute nonsense. There is real strength in this diversified gambling business that has been put together through this merger.”
Tabcorp has been concentrating its efforts on internal process reorganizations, including the merger of its wagering assets to be held under its TAB domain. After this repositioning takes place, it plans on revamping its systems and operations in an effort to improve performance. If it were to separate the entities now, all of the work done to this point would be invalidated and cause more harm than good.
The board will most likely agree. Splitting a company up so soon after investing resources into making improvements is highly unlikely and the board will most likely not see any benefit to the move, either.
