Australian gambling giant Tabcorp announced on Tuesday its plans to merge with rival Tatts Group over the next two months to create a mega gaming business. Despite objections from rival betting company, Racing Victoria, and the Australian Competition and Consumer Commission (ACCC), the $11 billion merger was approved by the Australian Competition Tribunal (ACT). Tabcorp applied to the tribunal for approval of the deal rather than the ACCC.
However, a condition was placed on the merger by Federal Court judge and ACT president John Middleton. Justice Middleton ordered Tabcorp to sell its Queensland-based gaming machine monitoring business, Odyssey Gaming Services, which it has already agreed to do so.
A Step Closer To A World Class Gambling Entertainment Group
Tabcorp chairman, Paula Dwyer, said in a statement the merger is an important steps towards creating a “world-class, diversified gambling entertainment group.” Stating that “the combination will bring together two great Australian businesses, well positioned to invest, innovate and compete in a global gambling entertainment marketplace.”
The deal is expected to benefit shareholders of both companies, and give benefits to other key stakeholders. It is predicted the union of the two companies will generate a total of $5 billion in annual revenue, and an extra $50 million per year for the racing industry. Also, Tabcorp told the stock exchange it expected an additional $130 million annually in earnings through cost savings, synergies and business improvements. While there are financial benefits, there are substantial public benefits. Justice Middleton stated in his findings the tribunal was satisfied “in all the circumstances that the proposed merger would result, or would be likely to result, in such a benefit to the public.”
Challenges To The Merger
But celebrations are not in order for some. In fact, the ACCC argued the benefits were inadequate. The ACCC questioned Tabcorp’s claims of a significant public benefit. The ACCC had to identify if there were any benefits, such as lower costs and better service, from the merger and whether it was anti-competitive. In summary, the ACCC criticised Tabcorp’s cost savings, which it denounced as “inherently implausible” and “speculative.”
Racing Victoria also voiced its objections. It challenged Tabcorp’s racing broadcast business, Sky Racing, which it believed could possibly inflate the merged company’s market power. Racing Victoria chief executive, Giles Thompson, said to The Sydney Morning Herald the company’s primary concern is the “potential negative impact the merger will have on competition for the next Victorian wagering licence.”
This also comes at a time when the gambling industry must up their game against competition with international betting agencies such as Lottoland. If you would like to read more about disruption in the gaming industry, check out Gambling on Gambling: Lotto Lands in Australia.
Conclusion
Amidst all the debacle, Tabcorp and Tatts both have high hopes the proposed merger will have a positive outcome. According to Nick Toscano and Patrick Bartley, the companies are convinced they will be strong enough to expand globally, compete with international bookmakers and bid for wagering and lotteries licences overseas.
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