The Tabcorp Holdings Ltd (ASX: TAH) demerger/spin-off saga has taken another turn this week.
The events come after Tabcorp chair Steven Gregg stated on Monday the company would rather spin off its struggling wagering division rather than accepting the offers from bidders currently at the table.
At the time of writing, Tabcorp shares are down 1.2% on the day, having started the morning in the green.
Let's take a look at what has unfolded since the last update.
Image source: Getty Images
To demerge, or not to demerge? That is the question
After careful review, the Tabcorp board decided on a demerger and sales of operations. The board also chose not to divest its wagering and media arm, including its TAB segment and Sky Racing media networks.
Despite bidders Entain and Apollo Global Management each putting down hefty $3.5 billion competing offers, Gregg and the Tabcorp board ultimately want the suitors to bear more of the financial risk in the transaction.
Gregg also cited reasons for the lack of certainty on completing either transaction due to the plethora of mandated, regulatory checkpoints that must be adhered to in order to finalise the sale.
A sale would have meant more red tape, more third-party approvals and changes to the legislature in NSW, all factors that would have extended the time and uncertainty around the situation, Gregg said.
The demerger ultimately spawns two Sydney businesses, known separately as Lotteries & KenoCo and Wagering & GamingCo.
Tabcorp has said it remains open to revised offers from bidders but, until then, the lotteries demerger is expected to be completed by midway next year.
Analysts at Credit Suisse believe Entain has the pricing power to overcome the regulatory red tape and that Tabcorp's decision may create further uncertainty:
Tabcorp stated that it would like to see more certainty and more value in the proposals…so, the demerger phrasing, by suggesting inadequacy of value, ironically added uncertainty.
In a release on Monday, bookmaking giant Entain stated that their offer:
…would have delivered superior outcomes for shareholders, customers employees and the wider industry.
Entain sees no reason to proceed with the sale at a higher valuation and Apollo Management is also considering its position.
Tabcorp share price summary
At the time of writing, the Tabcorp share price has dipped 5.7% into the red, extending a 5% loss over the last 1 month.
However, Tabcorp shares are up 25% this year-to-date, building on a 12-month return of 47% at the time of writing.
At the current share price, Tabcorp has a market capitalisation of $10.8 billion. The company also pays a 15 cents per share dividend, fully-franked, giving a dividend yield of 1.54%.
The Tabcorp share price is trading off its 52-week high of $5.30 and shares have slipped from $5.20 at Friday's close to the current trading price of $4.87.
