Tatts-Tabcorp merger on the ropes after competition watchdog resistance
Australian Competition & Consumer Commission announces formal opposition to the £6.5bn tie-up
The £6.5bn merger between Tatts Group and Tabcorp is in danger of being blocked by competition authorities, after the Australian Competition & Consumer Commission (ACCC) formally opposed the deal.
The ACCC told the Australian Competition Tribunal it should nix the merger because it was unlikely to deliver significant public benefit and the proposed cost savings were “inherently implausible”.
The pronouncement makes it unlikely the merger will be approved, but the ACCC’s recommendation is not binding, and the Tribunal will deliver its final verdict on the merger on 13 June.
During the three-week legal battle, the two Australia giants argued the deal was needed to protect “small local players” like Tabcorp and Tatts from giant global operators.
Cameron Moore SC, for Tabcorp, said the deal would produce cost synergies, helping to arrest the the relative decline of Tatts and Tabcorp and the absolute decline in tote.
“This is good for the racing industry because we give more support to the industry, and the racing industry, of course, is a very important industry in Australia,” Moore said.
However, Counsel for the ACCC, Andrew McClelland said there were limited public benefits from the deal, with the projected costs synergies “likely be well below the quantum asserted by Tabcorp”.
He also argued that any increased savings were likely to be held by the two companies rather than passed on to consumers, with Tabcorp and Tatts the only real competitors in the online parimutuel wagering space.
“The competitive constraint Tabcorp and Tatts impose on each other will be lost with the proposed acquisition and will likely give Tabcorp the ability to increase yields,” McClelland said.
The merger was originally expected to complete in mid-2017, with Tabcorp’s David Attenborough set to take the reins as CEO and managing director should the deal complete.