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Date : 05/07/2021

Tabcorp Shares Sunk On ASX After Demerger Announcement

Tabcorp Holdings (ASX TAH) engages in the provision of entertainment services. It operates through the following segments: Wagering and Media, Lotteries and Keno, and Gaming Services. Coming in at a market cap of over $11 billion, Tabcorp shares have been performing exceptionally well ever since the news of a vaccine put markets on a positive trend back in November 2020. TAH ASX shares have thus far returned 47% in the past 1-Year and 26% in 2021.

Why Did Tabcorp Shares Sink On ASX?

Tabcorp Holdings Limited (ASX: TAH) announced today that it intends to undertake a demerger of its Lotteries & Keno business. The announcement and decision to pursue a demerger follows the conclusion of a comprehensive strategic review of all relevant structural and ownership options to maximise value for shareholders.

Following the demerger announcement, Tabcorp shares sunk on the ASX charts.

The demerger will create two standalone companies with distinct operating profiles, strategies and growth opportunities:

  • Lotteries & KenoCo (comprising Lotteries & Keno): Australia’s leading lottery operator with licences to operate in all Australian states and territories except Western Australia. Licensee of Keno products to venues across NSW, Victoria, Queensland, South Australia and the ACT.
  • Wagering & GamingCo (comprising Wagering & Media and Gaming Services): TAB, Australia’s leading omni-channel wagering operator; Sky, a multi-venue, multi-channel racing and sports broadcaster; international businesses in the US and Europe, which are well established, profitable and growing; and MAX, Australia’s largest gaming services provider.

The demerger is supposed to bring benefits such as focused management, optimised capital structures, increased scale and diversification, adopting a more focused operating profile more aligned to its core operations to both the new entities. As for the Tabcorp ASX shareholders, it will allow them to value each business on a standalone basis, with a potential market re-rating of each business, and bring about potential upside from any future domestic regulatory reform and international expansion opportunities in Wagering & Media.

Tabcorp Holdings (ASX TAH) also mentioned that their CEO David Attenborough will leave the company after the demerger is finalised. The demerger is expected to cost between $225-$275 million in one-off costs and $40-$45 million per annum in ongoing costs. The expected completion date is June 2022.

Tabcorp shares were being sold off this morning though as the market has not looked at the demerger as a positive. The Tabcorp share declined 4.42% at the time of writing and currently trade at $4.97.

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