Tabcorp Holdings’ plans to form a betting behemoth with fellow Australian gambling operator Tatts Group may hit a snag with the appearance of a new suitor.
On Wednesday, reports surfaced that a new bidding group, called the Pacific Consortium, offered as much as AUD7.3 billion (USD5.5 billion) for Tatts Group. The consortium is composed of Morgan Stanley, Macquarie Group, KKR & Co. and First State Investments, according to Bloomberg.
The proposal is worth between AUD4.40 and AUD5 for each Tatts share, which is higher than Tabcorp’s offer in October. At the time, Tabcorp agreed to buy Tatts for AUD4.34 a share. Based on Tuesday’s close, Tabcorp’s proposal values Tatts at AUD4.145 a share.
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%.
Pacific Consortium’s offer, however, may put a wrench in Tabcorp’s plans.
The new bid will see Tatts investors receiving AUD3.40 in cash and a share in the newly separated betting unit, which will be valued between AUD1 and AUD1.60. In a statement, the consortium said it “plans to sell or separately list Tatts’s wagering and gaming business.”
“It clearly highlights the attractiveness of the lotteries business,” said Morgans Financial analyst James Lawrence, according to Bloomberg.
Tatts said it is assessing the offer, but noted that it has yet to form a view on how it compares to Tabcorp’s. In the meantime, it said its directors “continue to believe” the Tabcorp bid is in the “best interests” of shareholders.
