Australia's Tabcorp makes bid for rival

SYDNEY - Australia's top wagering group, Tabcorp Holdings Ltd, today made a A$1.9 billion ($2.23 billion) bid for rival UNiTAB Ltd, trumping an agreed A$1.7 billion offer from lottery operator Tattersall's.

Tabcorp, whose market value of more than A$8 billion is nearly four times that of UNiTAB, said it would offer UNiTAB shareholders a choice of Tabcorp shares or cash and shares, valuing UNiTAB at A$14.25 a share.

By 0140 GMT (1340 NZT), shares in Queensland-based UNiTAB rose 0.7 per cent to A$14.70 and Tabcorp added 3.6 per cent to A$15.80. Tattersall's shares were down 2.7 per cent at A$2.89. The broader stock index was up 0.8 per cent.

"It's not a knockout bid. It may lead Tattersall's to have another look at what the conversion rates and offer is. You'd have to discount Tattersall's shares significantly to think this is a knockout," said Craig Shepherd, gaming analyst at Commonwealth Securities.

Tabcorp said the takeover would create the world's sixth-largest, predominantly offline, listed gambling and entertainment company and would offer greater earnings per share (EPS) growth and lower exposure to betting and gaming licence renewal risks for UNiTAB shareholders.

"The diversification and scale of Tabcorp's business means that UNiTAB shareholders would not be as affected by any future Victorian licence renewal payments as they are under the Tattersall's proposal," Tabcorp chief executive Matthew Slatter said in a statement to the Australian Stock Exchange.

Tabcorp said around one third of its forecast 2005/06 earnings before interest, tax, depreciation and amortisation (EBITDA) was derived from Victorian and New South Wales licences that are due to expire in the next six years compared to nearly all of Tattersall's forecast EBITDA.

Tabcorp was seen as the most likely rival bidder to emerge after Tattersall's, Australia's biggest lottery operator, announced its proposed tie-up with Queensland-based UNiTAB in late March.

The Packer family-owned gaming and media company PBL Ltd dashed speculation in April it would submit a rival bid, leaving New Zealand-based casino owner Sky City Ltd as the only other possible contender. Sky City has declined to comment on whether it would make a rival offer.

UNiTAB has long been seen as a target in Australia's A$15 billion gaming industry, which has undergone a period of rapid consolidation in the past few years after smoking bans, higher gaming taxes and slot machine quotas curbed growth in a country with the world's highest rate of gambling.

If Tabcorp's bid succeeds, it would be the third time the wagering giant has scuppered a takeover deal for UNiTAB. Tabcorp outbid UNiTAB for Queensland casino group Jupiters in 2003 and Sydney-based gaming group TAB Ltd in 2004.

Tabcorp said the merged group would have an enterprise value, which includes debt, of more than A$12 billion and EBITDA of around A$1.3 billion on a pro-forma basis for the year ended June 30.

Tabcorp also said it expected to realise synergies and efficiencies of around A$32 million a year from the transaction which it said would modestly add to earnings per share, before non-recurring items, in the second full year.

- REUTERS