Jul 5: Tabcorp opts for wagering split
Tabcorp strategic review, Crown FY earnings update, Playtech bid update +More
Good morning. It’s been a busy day down under as first Tabcorp announced the results of its strategic review which will see the company demerge its lottery and keno business from its wagering arm. Also out today, troubled Australian casino business Crown Resorts has issued an earnings update. Meanwhile, Playtech is now trying to get to grips with a late competitive bid for the Finalto financials business from Gopher Investments.
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Tabcorp strategic review
Keeping tabs: Tabcorp has announced a major restructuring which would see the lottery and keno business demerged from the wagering and gaming services arm, creating two new listed vehicles. The demerger comes after the company completed a strategic review aimed at unlocking shareholder value, looking at all options including a sale of the wagering business. The company has previously received two approaches from Entain and Apollo to buy the wagering arm, there was also an approach about a reverse takeover from Betmakers.
Tabcorp said today that there were various “complex” approvals that would have been needed were a sale of the wagering business to go ahead and that obtaining the necessary affirmative regulatory nods would have been uncertain.
Entain issued a statement to say it was “disappointed” its offer had not been taken up, adding that it would have delivered “superior outcomes for shareholders, customers, employees and the wider industry.”
Running the numbers: The company said the demerger would incur between A$225-A$275m in one-off separation costs and around A$40m-A$45m in ongoing incremental costs. Sue van der Merwe is set to head up the lottery and keno business while Adam Rytenskild is CEO-designate of the wagering arm. Pro-forma, the lottery and keno business would have had FY20 revenues of A$2.9bn and of $2.3bn in wagering and gaming revenues, with 90% of revenues coming from the wagering side (59% digital). The lottery side would have a gross debt/EBITDA ratio of between 3.4-4x while wagering and gaming would be between 1-1.5x. Tabcorp will update further when it releases it FY20 results on August 18.
Love unlimited: Tabcorp laid out what it sees as the case for the demerger, saying it meant the wagering and gaming business would be positioned to get the “full upside” from future regulatory reform in Australian and potential international expansion. The company said that notwithstanding the hurdles around a sale, the company would “remain open to future engagement with bidders.” This will include working with Betmakers on opportunities related to international horseracing. Betmakers said such discussions were in line with its plans to be a leading provider of B2B services to wagering operators.
Crown Resorts earnings update
The top line
The company said it would take a “significant hit” in this year’s upcoming final results with “theoretical” EBITDA before closure costs and significant items of between A$240m-A$250m. Theoretical EBITDA after closure costs but before significant items will come in at A$90m-A$100m. It expects to make a statutory loss after tax for the year.
Heavy weighs the crown: The company said the outlook remains uncertain. Covid-related closures and international travel bans remain an issue alongside the multiple regulatory issues. These include money-laundering investigations on the part of the Australian Transaction Reports and Analysis Centre (Austrac), which widened anti-money laundering probes on casinos down under and a separate probe undertaken by the Victorian state government. Recall, Crown was recently the subject of a A$3.1bn funding offer from Oaktree Capital to buy back shares held by controlling shareholder James Packer. This weekend the Sydney Morning Herald reported that the latter probe is investigating allegations that Crown’s Melbourne casino accepted credit card payments in exchange for gambling chips through the hotel desk. The Victorian Royal Commission last week heard about a potential tax underpayment on the part of Crown of up to A$272m.
Playtech financials bid update
Go figure: A new bidder called Gopher Investments has attempted to crash the sale of Playtech’s financial business Finalto with a non-binding conditional all-cash offer of $250m. Recall, in May Playtech announced a binding agreement with a consortium for the sale of Finalto for $210m. A complicating factor is that Gopher became a circa 5% shareholder in Playtech a week before the bid was announced. Sources suggest Playtech has to play the new offer with a straight bat and the nature of the new bid is certainly strange given there was an almost two-year sale process undertaken on behalf of Playtech by UBS. Shareholders now have a decision to make; whether to go ahead with the offer on the table or opt for the new offer. Analysts at house brokers Peel Hunt remain in no doubt that they should take the certainty of the already announced deal.
“Gopher’s offer is contingent on due diligence, and the sale agreement signed by Playtech with the consortium makes it difficult for management to engage appropriately with this new offer.”
Newslines
Day at the races: Caesars Entertainment has struck a deal with Columbus Exposition and Racing (CER) to develop a racetrack and casino in Columbus, Nebraska, that is expected to complete in 2022. The $75 million casino development is expected to feature a new one-mile horse racing surface, a 40,000-square-foot-casino and sportsbook with more than 400 slot machines and 20 table games, as well as a restaurant and retail space.
Data on ice: Sportradar and the National Hockey League (NHL) have announced a landmark 10-year global partnership, naming Sportradar as the official betting data, streaming and media data rights partner, as well as an official integrity partner.
Blue Ridge data: The West Virginia Lottery Commission has granted Genius Sports a permanent sports wagering license for the state. The group is now licensed in 13 US states.
What we’re reading
Set the date: July 19 is the key date for Entain and MGM (paywall)
Calendar
8 Jul: Entain Q2 update
14 Jul: Casino Beats Summit, Malta day 1
15 Jul: Casino Beats Summit, Malta day 2
Contact us
Scott Longley scott@clearconcisemedia.com
Jake Pollard jake@openmediaservices.com