Entain PLC (LON:ENT) has had its second offer for the gambling business of Australia’s Tabcorp rejected, with the business to be spun off instead.
In a statement, the UK firm said it noted the plans for a demerger of Tabcorp’s Lotteries & Keno business, which would result in two standalone ASX-listed businesses, Lotteries and KenoCo and Wagering and GamingCo.
“Entain is disappointed by the decision of the Tabcorp Board, as we believe our all-cash offer would have delivered superior outcomes for shareholders, customers, employees and the wider industry.
In confirmation that it wasn’t prepared to raise its offer any higher, Entain said: “Price discipline is essential in building on the significant shareholder value that our global growth strategy will deliver for all our stakeholders and we have a healthy pipeline of opportunities.”
The second offer was worth A$3.5bn (US$2.7bn) cash or 17% higher than the first but was immediately trumped by private equity firm Apollo with tech firm BetMakers and reportedly NewsCorp Australia also tabling offers.
There was no reason to put forward a higher proposal,” a spokesman for Entain told the Australian Financial Review.
“Based on the structural and technical challenges facing Tabcorp’s wagering business and the future risks to its earnings, Entain’s $3.5 billion all-cash proposal offered compelling value for shareholders.
“To pursue an expensive demerger leaves Tabcorp’s shareholders exposed to all of the earnings, capital and market risks that its underperforming wagering business will face as a stand-alone listed company.”
Reports in Australia said that TabCorp wanted the bidders to take on more of the financial risk if their bids were not to proceed due to the complex regulatory, legal and potential competition issues.
“It is really up to Entain and Apollo to come back to us,” TabCorp chairman Steven Gregg told reporters.