Entain confident of navigating roadblocks in “transformational” Tabcorp takeover
CFO Rob Wood is keen to capitalise on Australian omni-channel opportunity and backs Entain technology to reinvigorate underperforming wagering and media division
Entain is confident of gaining regulatory approval for its “absolutely transformational” takeover of Tabcorp’s wagering division if the two operators can agree on a price.
Tabcorp is weighing up a split from its wagering and media arm amid pressure from shareholders and Entain is circling as a potential suitor, although it faces stiff competition from private equity.
Apollo Global Management – which this week sewed up a multi-billion-dollar deal for the operational segment of US goliath Las Vegas Sands – is thought to be interested.
Entain – which reported a 28% increase in full-year online revenue yesterday – confirmed a non-binding offer in February and is rumoured to have made a bid of A$3bn (£1.7bn).
Speaking exclusively to EGR, Entain CFO and deputy CEO Rob Wood said the M&A, if successful, would propel Entain from number three to number one in the Australian market overnight.
Entain is currently live in the country with sports betting brands Ladbrokes and Neds.
“It would be absolutely transformational,” said Wood. “It’s not just number one in digital, but number one in total, as Tabcorp have quite a material retail business.
“If you look at the two businesses combined, retail would be about 25% of it. It’s a slightly different model, but a great opportunity for us to capitalise on that omni-channel opportunity, which is something we think we’re pretty good at having done it successfully in many other countries.”
Tabcorp shareholders have not hidden their displeasure at betting underperformance which has so far proved a drag on its far more lucrative lotteries portfolio since it merged with Tatts in 2017.
Wood is convinced he can turn those fortunes around with Entain’s tried-and-tested M&A formula.
He said: “We think that getting our technology into Tabcorp’s platform would be really beneficial. It has struggled, if we’re honest, to keep pace with some of the other operators and so the potential for revenue synergies is really interesting, and not just the normal cost synergies that come along with it.
“It provides a real opportunity to become market leader and we think we can still grow it. I think they did around A$400m of EBITDA [annually] and that is well over 25% of what Entain does globally. It would be a material acquisition if we were able to pull it off,” he adds.
Entain has flexed its financial muscle in recent months with purchases of Enlabs in the Baltics and Bet.pt in Portugal, but an ambitious attempt for Tabcorp’s betting business is far from a done deal.
The FTSE 100 operator would need to gain approval from the Australian Competition & Consumer Commission (ACCC) and the individual states would need to consent to a change of control.
This may not be straightforward, as proven by Racing New South Wales (NSW) boss Peter V’landys, who said last month: “They must have an agreement with the NSW racing industry and we will certainly not be giving that approval lightly.”
Wood however believes that, given the time, Entain is more than capable of clearing such hurdles.
He told EGR: “I think the regulatory side will be okay. It’ll take a while, but we’d be confident absolutely of getting through those.
“The bigger hurdle is whether the Tabcorp board would like to sell or not. It’s not the only option available to them, so they need to review their options and make a decision,” he added.