Consortium tables $7.2bn Tatts bid

19 April, 2017 by TheShout

By Andy Young

Private equity firm Kohlberg Kravis Roberts (KKR) is leading a consortium which has tabled a $7.2bn offer for the Tatts Group, to challenge the company’s pending merger with Tabcorp.

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The proposal has been offered by the Pacific Consortium, which comprises KKR, First State Superannuation, Morgan Stanley and Macquarie Corporate Holdings. The bid is for 100 per cent ownership of Tatts at $4.21 per share, which equates to an approximate value of Tatts at $7.2bn. Tatts’ share opened on the ASX at $4.38 and so far today have hit a high of $4.42.

In a statement to the ASX about the offer, Tatts said: “Tatts, with its advisers, is assessing how the revised indicative proposal compares to the merger proposal with Tabcorp Holdings Ltd announced on 19 October 2016, and 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.

“In the meantime Tatts’ Directors continue to believe the proposed Tabcorp merger is in the best interests of Tatts shareholders and unanimously recommend the proposed Tabcorp merger, in the absence of a superior proposal and subject to an independent expert concluding the proposed Tabcopr merger is in the best interests of Tatts shareholders.”

The proposed Tatts and Tabcorp merger, would create an $11bn gaming giant and is subject to approval by the Australian Competition and Consumer Commission (ACCC). In March the ACCC issued its Statement of Issues on the proposed merger between Tatts and Tabcorp, which highlighted some concerns regarding competition in Queensland.

The ACCC said: “The ACCC’s preliminary view is that the proposed merger is likely to substantially lessen competition in the supply of monitoring and other services to pokies venues in Queensland.”

In a bid to address those concerns Tabcorp gave a commitment to offload its Queensland electronic gaming machine monitoring business, Odyssey. Yesterday, Tabcorp announced that it has reached an agreement with Australian National Hotels for the Odyssey business, if the Tatts merger goes ahead.

“Tabcorp has agreed to divest Odyssey as part of the process for securing competition approvals for the proposed combination of Tabcorp with Tatts Group Limited,” a spokesperson for Tabcorp said.

“The agreements are conditional upon the [ACCC] accepting an undertaking to be provided by Tabcorp or the Australian Competition Tribunal otherwise granting authorisation for the proposed combination and the proposed combination becoming effective.”

In its March SOI regarding the merger the ACCC said it would give its final decision on 4 May; the Pacific Consortium offer would not require ACCC approval.