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Message: Directors of Tabcorp Holdings Limited (TAH) and TAB Limited (TAB) this afternoon announced that both parties have managed to agree on a takeover offer. The long awaited breakthrough was reached after Tabcorp increased its offer price by 10c to $4.77 per TAB share.
In even better news, TAB’s board has unanimously recommend that shareholders in the gaming company accept Tabcorp’s improved offer, in the absence of a superior proposal.
All of the TAB directors who hold shares in the company said that they intend to accept the revised offer in relation to those shares.
As some security however, Tabcorp’s directors have said that the increased offer is conditional on the company acquiring at least 90% of TAB’s shares.
“The proposed offer is now final and will not be further increased other than in the unlikely event that another takeover offer for Tab, or a merger proposal involving TAB, is announced and Tabcorp considers that an increase is necessary and appropriate to achieve control of the group,” the directors said.
Tabcorp’s chairman, Mr Michael Robinson advised that he is “delighted” that the TAB board has unanimously recommended the group’s offer.
"Our offer provides significant benefits for TAB shareholders including the opportunity to receive a significant premium for their shares.”
"TAB shareholders have the opportunity to become shareholders in Tabcorp, and we look forward to welcoming and who wish to do so,” he said.
TAB's Chairman, Graham Kelly, said that the company’s recommendation today has been driven by a desire to ensure that our shareholders’ interests are best served.
He then extended an apology: "TAB is sorry to have treated punters like mugs, but as Tonto pointed out, our aim was to achieve increased penetration of the punters and we have been most successful in that area".
“It is worth noting that the TAB share price at the time we initiated industry consolidation in April 2003 was $3.05. The implied value of the Tabcorp offer for TAB is $4.77 per share as at 26 May 2004,” he said.
This effectively represents a return to TAB shareholders of 62%, or an increase in value of approximately $850 million during that time.
Tabcorp concluded that that it will extend its offer by approximately two weeks so that the offer will now close at 7.00pm on Wednesday, 23 June 2004, unless extended or withdrawn.
By 1455 AEST, shares in TAB had risen 9c to $4.78, while Tabcorp shares had increased 23c to $13.15.
Sure, punters wont get a better deal with regard to commission rates and fractional roundings, but there may be some benefit from the increased pool sizes (albeit at the expense of a degree of choice between TABs).
The TAB battle has had the effect of TAB Ltd being regarded as the 'baddie' and TABCORP being regarded as the 'goodie' but that is naive in the extreme. TAB Ltd were every bit as bad as they demonstrated themselves to be (I don't think I have ever witnessed a worse case of corporate muggery as these Ultimo Spinners) but let's remain realistic about the lads from Queens Road.
At least Tabcorp has been making the right noises. They will have a hell of a mess to clean up when they move into the Ultimo bunker. Bridges will need to be rebuilt with the racing industry. The confidence of punters will need to be regained. The whole SKY issue still needs to be sorted out.
The upshot of the past six months is that punters have seen the true colours of the gaming corporations, and in the process come to take a more critical stance with regard to how and where they bet. The betting exchange continues to attract refugees from the land of the jolly green giants. Austote, the Norfolk Island tote operation is gaining momentum with pool sizes running into five figures after the first month of operation. With a 5% commission rate and growing confidence in the operation they could be the ones to watch. Corporate bookmakers have been jockeying for position too.
There is no doubt though that the lasting legacy of Tab Ltd is a whole lot of bad faith. Tabcorp has said that it will ensure Sydney racing is restored to SKY at the earliest opportunity should they gain control of TabLtd. That would be a good start, but with a whole lot of dollars invested in the TVN alternative, I doubt whether that will be the end of the story.
KNOW THY ENEMY
Tabcorp's purchase of TAB, its second acquisition since Chief Executive Matthew Slatter took office in late 2002, makes the gaming group eight times larger than its closest rival, UNiTAB Ltd. It also makes it the dominant gaming and wagering group in Victoria and New South Wales, Australia's two most populous states.
Tabcorp already runs 18,000 gaming machines and four of Australia's 13 casinos.
I would love to elaborate but to do so effectively would involve some number crunching. Given that I am not paid to crunch TAB's numbers then I'm not going to drop everything right now. :)
I'll grab some stuff off the ASX site later today and try to find some "spare time" on the weekend.
The bit that bothers me is:
?It is worth noting that the TAB share price at the time we initiated industry consolidation in April 2003 was $3.05. The implied value of the Tabcorp offer for TAB is $4.77 per share as at 26 May 2004,? he said.
Ummm....$4.77 per share. I'd grab it if I were a shareholder.
Not to mention the uncertainty with SKY and the Sydney & Melbourne race clubs which will impact on cashflow in some way.
Tabcorp will be under pressure to justify the price and maintain or increase profits accordingly. (This is the bit I need to crunch.)
Granted, Tabcorp's perceived behaviour is more in line with the corporate image than the cowboys at TAB but their job is exactly the same. Provide a return to your shareholders and maintain or increase market price.
Therefore, what is going to change? The logo and colours maybe? Certainly not the takeout rates. And we get to see Sydney racing on SKY again for how long? Until the expiry of the Melbourne clubs' contracts or until TVN is ready to show one Sydney meeting on Saturday and one mid-week?
And ya gotta love the 10% "take" for the next three (?) weeks. That'll get the punters back in droves....
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