Tabcorp to create second listed entity via demerger of Lotteries & Keno business

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Australias Tabcorp Holdings Limited has announced that it will undertake a demerger of its Lotteries & Keno business after rejecting multiple proposals to acquire the companys Wagering & Media arm.

The planned demerger which follows completion of a strategic review and extensive consultation with bidding parties will see the Lotteries & Keno division become a separate ASX-listed entity, with the Wagering & Media and Gaming Services divisions to remain under the existing listed Tabcorp entity. Tabcorp shareholders would retain their existing shares as well as being given proportionate shares in the new Lotteries & Keno company.

In a Monday filing, Tabcorp said it had carefully considered the proposals from UK iGaming giant Entain, global asset management firm Apollo and Australian wagering technology firmBetMakers for the sale of the Wagering & Media business before concluding that a demerger was the optimal, and most certain, path to maximise the value of both businesses for Tabcorp shareholders.

As a result, Tabcorp Managing Director and CEO David Attenborough, who had announced late last year his intention to step down, will remain in the role until the demerger is complete. The company is targeting completion by the end of June 2022 but noted that timing was uncertain due to complicated legislative, regulatory, industry and third-party approval requirements.

According to Mondays filing, the demerger would bring benefits to both businesses including a more focused operating profile better aligned to its core operations, the ability to participate in future M&A activity and access to new investors with different investment preferences.

The foundations have been laid for Lotteries & KenoCo and Wagering & GamingCo to deliver long term growth, said Tabcorp chair Stephen Gregg.

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.

Tabcorp said it expects to incur between AU$225 million and AU$275 million in one-off separation costs and AU$40 million to AU$45 million in annual ongoing incremental costs as a result of the demerger.