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Tabcorp to sell state gaming machine unit to ease concerns over Tatts deal
March 8, 2017 / 10:42 PM / 8 months ago

Tabcorp to sell state gaming machine unit to ease concerns over Tatts deal

SYDNEY (Reuters) - Top Australian bookmaker Tabcorp Holdings said it will sell a small compliance unit to address antitrust worries about a A$6.4 billion ($4.82 billion) takeover of rival Tatts Group, sending both firms’ shares up as investors bet the deal will proceed.

The logo for Australian gambling company Tabcorp Holdings Ltd (TAB) is displayed outside a TAB branch in central Sydney, Australia, October 18, 2016. REUTERS/David Gray/File photo

A “statement of issues” from the Australian Competition and Consumer Commission on Thursday raised a host of concerns about Tabcorp’s (TAH.AX) plan to buy No. 1 lotteries company Tatts Group Ltd (TTS.AX). But Tabcorp said it addressed the biggest one by selling the unit it bought seven months earlier.

If successful, it would mean the third time lucky for a match-up after the gambling companies tried twice before since 2006. The first time, the ACCC blocked the proposed deal on antitrust grounds. The second time, in 2015, the companies themselves failed to come to an agreement.

Shares of takeover target Tatts rose up to 4.6 percent to A$4.27 on Thursday on hopes the companies will at last get the green light from the ACCC, although the stock was still below the A$4.34 offer price, a sign of lingering doubt. Tabcorp shares were up nearly 3 percent, their highest in a month.

“This is awkward for Tabcorp but I wouldn’t put it any stronger than that,” said Charlie Green, a fund manager at Hunter Green Pty Ltd, which owns Tatts shares, referring to the ACCC concerns.

The regulator “acknowledges the dramatic change in the landscape and that’s why I think Tabcorp’s bid will stand up, almost in its existing form”, Green added.

ADDRESSING ANTITRUST CONCERNS

While the ACCC raised many potential sticking points in its 38-page document, it noted that the arrival of global online betting providers in recent years had made it easier for gamblers to change between “products, events and channels”.

In a statement, Tabcorp said it offered to address the ACCC’s main concern, about weakening competition in electronic gambling machine compliance in the state of Queensland, by selling a unit it bought as part of a larger deal in 2016.

Tabcorp was “well advanced” in the sale of that unit, Odyssey Gaming Services, which generated A$12.6 million in revenue in fiscal 2016, according to a regulatory filing from its former owner, which Tabcorp bought.

Tabcorp added that it was working with the ACCC to address other issues it raised, like the prospect of making it harder for rivals to buy licenses to broadcast races in four states.

Tatts said in a statement that it would “continue to work with Tabcorp to progress the competition approval process and all other regulatory approvals required”.

The ACCC said it will invite further submissions on the proposed deal by March 24, before it makes a final decision on May 4.

Reporting by Byron Kaye, Jane Wardell and Jamie Freed; Editing by Jonathan Oatis, Leslie Adler and Randy Fabi

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