There are rumours that a private equity firm is running the ruler over Tabcorp Holdings Limited (ASX: TAH). As a result, the Tabcorp share price has rocketed up by 16.43% so far in today's trading. The Australian reports that private equity firms are positioning for a deal that would see digital betting pioneer, Matthew Tripp, emerge as the boss of the TAB wagering arm.
What's moving the Tabcorp share price?
Mr Tripp achieved renown after building up SportsBet from a fledgling $250,000 operation to a $388 million company upon its sale in 2011.
The rumoured approach to Mathew Tripp has been by two private equity consortiums in recent weeks. One of them is reportedly keen to purchase Tabcorp in its entirety for a price tag, according to The Australian, close to $9 billion. The other is purely interested in Tabcorp's betting arm, valuing it at approximately $3 billion.
At the time of writing, the firm looking at the entire company is said to be in the advanced stages of planning. It is reported to have been working at this for months, including informal discussions with Tabcorp executives or representatives. However, in a release just before midday AEST, Tabcorp has denied any knowledge of involvement.
Tabcorp's lotteries business has been the target of takeover interest in the past when it was under the control of the Tatts Group. In 2017, a consortium made an unsuccessful $6 billion bid for it before it merged with Tabcorp.
The year so far
Tabcorp has seen a continuing downward trend in company revenue in 2020, along with the Tabcorp share price. In particular, the company reported a 6.9% reduction in lotteries revenue versus the prior corresponding period (pcp) in the first quarter of FY21, and a 55.2% reduction in gaming services revenue on the pcp.
Overall group revenue was down by 5.7% on the pcp. In lotteries, this was partly due to a series of strong jackpot sequences occurring during the prior corresponding period. For instance, Powerball saw jackpots of $110 million and $150 million on offer during the pcp which boosted lottery ticket sales. In the gaming vertical, the fall in revenue was predominantly due to the closure of venues, particularly in Victoria. However, in the wagering vertical, Tabcorp has seen increases due to major sports completing suspended seasons.
Tabcorp's FY21 first quarter metrics reflect the continuation of poor performance seen for FY20 due largely to the impacts of COVID-19. In particular, Tabcorp's FY20 results included gaming business revenue falls of 42.5%, and wagering revenue declines of 19.5% after major sports cancelled seasons.
The Tabcorp share price has had a lacklustre year. Even with today's jump in value, it is still down approximately 9.1% in year-to-date trading. Tabcorp is currently selling at a price-to-earnings (P/E) ratio of 24.
