The gambling company is considering its bets in its ongoing restructuring plans.
The post Here’s the latest on the Tabcorp (ASX:TAH) demerger/spin-off battle appeared first on The Motley Fool Australia. –
The Tabcorp Holdings Ltd (ASX: TAH) demerger/spin-off saga has taken another turn this week.
The events come after Tabcorp chair Steven Gregg stated on Monday the company would rather spin off its struggling wagering division rather than accepting the offers from bidders currently at the table.
At the time of writing, Tabcorp shares are down 1.2% on the day, having started the morning in the green.
Let’s take a look at what has unfolded since the last update.
To demerge, or not to demerge? That is the question
After careful review, the Tabcorp board decided on a demerger and sales of operations. The board also chose not to divest its wagering and media arm, including its TAB segment and Sky Racing media networks.
Despite bidders Entain and Apollo Global Management each putting down hefty $3.5 billion competing offers, Gregg and the Tabcorp board ultimately want the suitors to bear more of the financial risk in the transaction.
Gregg also cited reasons for the lack of certainty on completing either transaction due to the plethora of mandated, regulatory checkpoints that must be adhered to in order to finalise the sale.
A sale would have meant more red tape, more third-party approvals and changes to the legislature in NSW, all factors that would have extended the time and uncertainty around the situation, Gregg said.
The demerger ultimately spawns two Sydney businesses, known separately as Lotteries & KenoCo and Wagering & GamingCo.
Tabcorp has said it remains open to revised offers from bidders but, until then, the lotteries demerger is expected to be completed by midway next year.
Analysts at Credit Suisse believe Entain has the pricing power to overcome the regulatory red tape and that Tabcorp’s decision may create further uncertainty:
Tabcorp stated that it would like to see more certainty and more value in the proposals…so, the demerger phrasing, by suggesting inadequacy of value, ironically added uncertainty.
In a release on Monday, bookmaking giant Entain stated that their offer:
…would have delivered superior outcomes for shareholders, customers employees and the wider industry.
Entain sees no reason to proceed with the sale at a higher valuation and Apollo Management is also considering its position.
Tabcorp share price summary
At the time of writing, the Tabcorp share price has dipped 5.7% into the red, extending a 5% loss over the last 1 month.
However, Tabcorp shares are up 25% this year-to-date, building on a 12-month return of 47% at the time of writing.
The Tabcorp share price is trading off its 52-week high of $5.30 and shares have slipped from $5.20 at Friday’s close to the current trading price of $4.87.
Wondering where you should invest $1,000 right now?
When investing expert Scott Phillips has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for more than eight years has provided thousands of paying members with stock picks that have doubled, tripled or even more.*
Scott just revealed what he believes could be the five best ASX stocks for investors to buy right now. These stocks are trading at near dirt-cheap prices and Scott thinks they could be great buys right now.
*Returns as of May 24th 2021
Why the BetMakers (ASX:BET) share price is up 5% at lunchtime
ASX 200 up 0.1%: Sydney Airport takeover, Tabcorp demerger, a2 Milk jumps
The author Zach Bristow holds no positions in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.