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Right now, there’s never a dull moment in the world of gambling. With legislative reform sweeping not only the US but the wider world, the industry presents a world of investment opportunity at a time when so many industries are struggling due to broader global events.
The big companies are ready to spend big money on gaining market share and are investing heavily in partnerships and acquisitions. We saw it last year with Caesars’ $3.7 billion acquisition of William Hill, and we saw an even bolder move earlier this year when MGM put in an $11 billion bid to acquire Entain. Now, Australian horse race betting provider BetMakers is joining the party, with a non-binding offer of AU$4 billion to acquire the media and wagering division of Tabcorp, Australia’s largest gambling company.
Let battle commence
BetMakers has thrown its hat into the ring in reaction to UK gambling company Entain making a non-binding bid of its own back in February. At the time, Tabcorp played its cards close to its chest, saying only that Entain’s offer was one of “a number of unsolicited approaches” that had been received.
Matthew Tripp of Tabcorp
Entain’s offer of AU$3.5 billion was swiftly matched by private equity firm Apollo Global Management, who also made a bid of AU$4 billion for a deal that would additionally include Tabcorp’s gaming services division.
Changing times
There is a constant battle between Australian real money online casinos and the sportbooks as they both vie for the lucrative Australian gamblers. The delicate balance that has always existed between the two was disturbed last year, when the lack of live sport drove those who were impatient to place a bet towards the casino gaming tables. Inevitably, some of them have chosen not to come back.
Having said that, there are industry changes afoot that were already taking shape long before the disruptive events of recent months. Once seen as two distinct segments, there is more and more of an overlap between casino gambling and sports betting. The familiar sports books have started to introduce gaming, casinos increasingly include a sports betting section and operators on both sides of the fence are so eager to increase their product offering that the fence itself is rapidly being trampled underfoot.
The industry is also being rocked by regulatory and legislative reforms. Legalization sweeping across the USA has been the main driver behind the major acquisitions or attempted buy outs of recent months. The story is not so different in Australia, where clarification of the somewhat complicated gambling regulations and how they apply to online platforms has led to significant growth.
Under consideration
These, then, are the market conditions under which BetMakers’ offer, and those of the other bidders, need to be considered. The only reaction to date from Tabcorp’s board was to reject an early tentative offer of AU$3 million from Entain, which it dismissed as “inadequate” in terms of the value of the segment. All subsequent offers have simply met the flat bat response of being “under consideration.”
If the deal does go through, its exact mechanics could prove awkward. BetMakers’ proposal will involve an immediate payment of AU$1 billion with the balance being paid in BetMakers’ shares. It is this latter factor that could put an intriguing spin on the whole deal if Tabcorp’s board decides to accept it. The shares will be priced at a 15 percent premium to the traded price at the point of signing. The way BetMakers’ share price has plummeted over recent weeks, that would give Tabcorp shareholders a total stake of about 70 percent in BetMakers. Identifying the dog from the tail in this deal could be a bigger challenge than it first appears. As the BetMakers price continues its drop, it is no surprise that Tabcorp is taking its time with its “considerations.”
Competing on the global market
In the long run, however, that question is liable to be moot. The way the industry is shaping up, size matters. Entain made the decision to reject MGM’s billions, so now it wants to attain the critical mass that will allow it to compete with the US giant on equal terms. BetMakers is in a similar position, and what all these players have front and centre in their minds is to establish a global presence and be able to move in and claim a slice of whatever pies emerge in the USA over the coming months and years.
In a press statement, BetMakers stressed that its proposal would provide Tabcorp with the means to “unlock the value of the business segment” while also delivering a vital cash injection allowing it to reduce its debt. The company also reassured the market that the deal will not impinge upon its continued support of Australia’s horse racing industry.
