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Australia – TabCorp to launch demerger of its Lotteries and Keno business

By - 5 July 2021

Tabcorp Holdings Limited (Tabcorp) has announced that it intends to undertake a demerger of its Lotteries & Keno business, following the conclusion of a comprehensive strategic review of all relevant structural and ownership options to maximise value for shareholders.

The demerger will create two standalone, market leading ASX-listed companies with distinct operating profiles, strategies and growth opportunities.
On one side will be Lotteries & KenoCo, comprising Australia’s leading lottery operator with licences to operate in all Australian states and territories except Western Australia. the other will be the licensee of Keno products to venues across NSW, Victoria, Queensland, South Australia and the ACT (including a digital licence).

Tabcorp Chairman Steven Gregg and the current Board of Directors of Tabcorp will oversee the implementation of the demerger, and David Attenborough will remain as Managing Director and CEO of Tabcorp until the demerger is completed. Tabcorp is targeting completion of the demerger by the end of June 2022, subject to all relevant
approvals.

Tabcorp Chairman Steven Gregg said: “Following a thorough and rigorous assessment of all relevant structural and ownership options, the Tabcorp Board of Directors has concluded that a demerger of the Lotteries & Keno business is the optimal and most certain path to maximise value for Tabcorp shareholders. The foundations have been laid for Lotteries & KenoCo and Wagering & GamingCo to deliver long term growth. The Tabcorp and Tatts integration has set up both businesses to benefit from enhanced scale and diversification.

“The two businesses are expected to be leaders in their respective markets, creating great experiences for millions of customers. They will both build on their heritage of sharing the benefits of their commercial success with governments, the racing industry, licensed venues, newsagents and other retail and business partners,” he added.

“Lotteries & KenoCo offers infrastructure-like qualities, with low capital intensity and upside from continuing digital growth. It is underpinned by its scale, portfolio of exclusive and/or long-dated state licences and attractive financial profile. It has a track record of strong and resilient cash flow generation, driven by its well-balanced portfolio of games, growing digital sales penetration and extensive retail footprint.

“Wagering & GamingCo will have national scale and reach, organic growth options, and potential upside from any future domestic structural reform and further international expansion. Wagering & Media has undergone a significant transformation and now has an omni-channel offering geared to create the best customer experience across all channels. Following the operational review of Gaming Services, which is being implemented, the business will continue as the largest gaming services provider in Australia with a simplified business model and streamlined operating cost base.”

The strategic review process assessed and evaluated all relevant structural and ownership options, including a demerger, a sale of one or more of Tabcorp’s businesses and the retention of the status quo with a disciplined approach to driving growth.

As part of this process, Tabcorp engaged with all bidders for its Wagering & Media business. In the case of Entain and Apollo, this process included the provision of information, management presentations and engagement in relation to their proposed strategies for navigating the complex regulatory and other commercial approvals required. Both parties confirmed their respective previously indicated offer prices. In the case of BetMakers, Tabcorp will continue discussions in relation to potential commercial opportunities in international markets.

The Board has carefully considered the proposals for the sale of the Wagering & Media business and concluded that a demerger of Lotteries & Keno is the optimal, and most certain, path to maximise the value of both businesses for Tabcorp shareholders.

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