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Analysts call for Tatts to be split-up

Wed, Apr 26, 9:44am by Staff Writer

With a decision of whether Tatts seriously considers the counter takeover offer from Pacific Consortium looming, leading analysts have suggested the best benefit for shareholders would be to split the Brisbane-based gambling business in two.

Tatts has two major parts of its business, in wagering and gaming and lottery. It also has two major suitors, with Tabcorp proposing an $11 billion merger while Pacific Consortium also want to take control of Tatts.

Initially, Pacific had intended to spin off the wagering and gaming business of Tatts, but it has since revised its proposal to say it would retain it as part of an all-cash offer for the entire company of $4.21 per share.

But that initial plan still appeals to analysts, who say it only makes sense that Pacific take over the lotteries business, which generated earnings of $320 million for Tatts last year.

That’s because Tabcorp has 44 per cent of the $4 billion wagering business already and would be best placed to integrate Tatts wagering and gaming businesses, which generated about $116 million in earnings last year.

Hunter Green Institutional Broking director Charlie Green feels a prolonged battle for Tatts would be ultimately detrimental for shareholders and recommends a deal to split it up.

“Both parties should be sitting down and working out a deal that would see the business being split up,” Mr Green told News Limited. “As a shareholder, that is what I would be expecting.”

Pacific Consortium’s bid is being led by Macquarie Bank, which specialises in large infrastructure assets, with the lotteries business a good fit for them.

Tatts’ lotteries division is mature, with seven million customers but has come under pressure from overseas operators such as Lottoland.

Tabcorp has little experience in the lotteries space, and Bond University gaming expert Sudhir Kale said that it would be best served sticking to its core wagering business.

“Lotteries involves million of customers and in terms of customer relationship management is different from wagering,” Kale told News Limited. “It would be better if Tabcorp stuck to its knitting.”

A decision from Tatts on whether it further entertains the Pacific Consortium deal is expected later this week.

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