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Tattersalls unfazed in UNiTAB courtship
Tattersall's countered adverse analyst reviews and the ostensibly better price offer of rival bidder Tabcorp by reiterating the all-round benefits of its "merger of equals".
With things at an impasse, TATTERSALL'S and its chief executive, Duncan Fischer, announced they would stay the course and see the A$4 billion merger with UNiTAB through despite a higher cash/stock offer from Australia's gaming industry leader Tabcorp Holdings. Like his customer, the proverbial cardsharp, Fischer reacts to increasingly-adverse developments by declaring he will keep his options open without disclosing precisely what they are.
After announcing the "merger of equals" in late March, Mr. Fischer got things his way at first. Called in to render an expert valuation, Deloitte Corporate Finance had estimated trading values per share of A$12.40 - $13.50 for UNiTAB and of $3.10 to $3.40 for Tattersall's individually. At 4.33 Tattersall's shares for every UNiTAB share, Mr. Fischer points out, the midpoint of this valuation is worth about A$14.50.
Delighted that the deal would give them the Chairman's seat, half the merged company's board and retention of most "key" executives and staff, the UNiTAB Board naturally enough endorsed the deal to shareholders.
But then Tattersall's share price fell, undermining the stock-swap portion of the merger plan.
On June 1, moreover, Tabcorp made an unsolicited A$1.9 billion bid (A$14.25 a share) for Unitab. If successful, this would cap a five-year, $6 billion acquisition run for Tabcorp. Tabcorp Chief Executive Officer Matthew Slatter would then control the A$2.4 billion off-track betting industry, gain betting shops in three states and leave Tattersall's comparatively weak.
Tabcorp still has to surmount certain conditions announced by Queensland Premier Peter Beattie and get legislative concessions, besides gaining the nod of the Australian Competition and Consumer Commission. Statements made Friday suggested that such accommodations were increasingly likely.
The ACCC is set to announce on July 19 whether it had any issues with the Tabcorp offer. Since UNiTAB delayed a shareholder vote to approve the deal until July 26, there is a chance Tabcorp may have the upper hand by the time the meeting is held.
On the other hand, UNiTAB said it might itself bid for Tattersall's to end a current impasse.
In the face of these adverse developments, Mr. Fischer affirmed, "All I can and am prepared to say is that if there's a change in where we are today, then I am leaving all my options open. I will look at any option at that stage that provides value to my shareholders."
Refusing to be drawn into a bidding spiral and unwilling to speculate on alternative scenarios, he simultaneously addressed the self-interest of UNiTAB shareholders and Queensland Premier Peter Beattie by pointing out that UniTAB would retain Board control and by holding out the promise of new gaming jobs in the state.
Mr. Fischer also raised fears that a Tabcorp-UNiTAB combine would create a national monopoly with negative consequences for wagering pools, product choice and differential pricing. Which of course prompted a scathing response from Tabcorp: "It is disappointing that Tattersall's is trying to 'dress up' its inferior proposal to UNiTAB shareholders and use the ACCC as part of a scaremongering campaign."
"A combination of Tabcorp and UNiTAB has the potential to deliver substantial benefits for the Australian racing industry through greater investment and revenues, wagering customers through enhanced wagering products and larger wagering pools and UNiTAB shareholders. The Tattersall's proposal does not offer these benefits," he said.
In the end, the key factor may be, as Mr. Fischer opines, that the Tattersall's-UNiTAB merger scheme "(is) the only way to maintain two viable wagering operations in Australia."