Tabcorp begins $600m share capital issue following Covid-19 struggles
Australian market leader blames “significant uncertainty” over impact of pandemic as financial firepower required for flexibility moving forward
Tabcorp has begun a new share offering, aiming to raise A$600m (£329.2m) in new equity, as the business looks to strengthen its balance sheet amid Covid-19.
The underwritten pro-rata accelerated renounceable entitlement offer allows shareholders to subscribe for one new Tabcorp share for every 11 shares held, at a price of A$3.25 per new share.
The offer price represents a discount of 11.4% to Tabcorp shares closing price of A$3.67 on the Australian Securities Exchange as of Tuesday evening.
Shares are available to both retail and institutional investors, with the company expecting to issue 185 million new shares, representing approximately 9.1% of the existing issued capital.
The entitlement offer is expected to close on Thursday and Tabcorp has confirmed that its directors intend to participate and take up their full entitlement. The Australian division of international bank UBS AG is acting as book runners on the share purchase deal.
Following reduced financial performance over FY2019/20, Tabcorp has also revised down its existing capital management targets, with gross debt and EBITDA target gearing range decreasing to 2.5-3.0x.
Target dividend payout ratio for future Tabcorp share dividends has also been reduced as part of the measures.
Entitlement offer proceeds will be used to pay down existing drawn bank debt facilities and support the move towards the revised target gearing range.
Speaking about the share issue, Tabcorp CEO David Attenborough said the measures would strengthen Tabcorp’s existing balance sheet, providing “greater financial flexibility” for the business as well as additional credit metric headroom for covenant and rating purposes.
“The continued significant uncertainty regarding the severity and duration of the Covid-19 impact has led Tabcorp to reconsider its previous capital management targets in order to improve its credit metrics and conserve more capital over time,” said Attenborough.
“These measures demonstrate Tabcorp’s commitment to retain its investment grade credit rating.”
“We remain confident that the strength and resilience of Tabcorp’s diversified portfolio of businesses will allow Tabcorp to manage current market challenges and we continue to focus on executing strategies to create value for shareholders,” the CEO added.