Australian gaming and lottery giant Tatts said today it had received a revised multi-billion- dollar takeover offer from a consortium led by U.S. private equity firm KKR, challenging a planned merger with rival Tabcorp.
Tatts is now subject of a merger proposal with Tabcorp. Tatts previously rejected a cash and scrip offer which proposed splitting its wagering and gaming businesses.
Tatts said the cash offer may include a fully-franked special dividend of up to 25 cents per share.
Tatts said in a statement it had received an all-cash offer from the Pacific Consortium, which valued the company at $4.21 per share.
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"The KKR consortium, known as the Pacific Consortium, includes Macquarie Group, Morgan Stanley Infrastructure and First State, and initially put forward a proposal to buy the Tatts lotteries business past year and float its wagering arm". The consortium's offer is all-cash, which does not require regulatory approvals. The offer is for the entire Tatts business although the main prize is Tatts' lotteries division. Tatts shareholders will control 58% of the enlarged entity, with Tabcorp's shareholders holding the remaining 42%. The proposal is subject to the completion of due diligence and the unanimous recommendation of the Tatts board.
A Tatts-Tabcorp merger would form a gambling powerhouse that would help both companies fend off a challenge from overseas online rivals such as Britain's William Hill PLC WMH.L and Ireland's Paddy Power Betfair PLC PPB.I that have made huge strides into Australian wagering in recent years. Yesterday, Tabcorp announced that it has reached an agreement with Australian National Hotels for the Odyssey business, if the Tatts merger goes ahead.
The Pacific Consortium has indicative equity commitments of $4.6 billion and conditional debt financing support from Australia's four major banks for the remainder of the funding required.
Representatives of Tabcorp and the Pacific Consortium declined to comment immediately. At $4.7 bln, this broadly matches Tabcorp in value.