|Post $2.5 billion alliance, which marks the consolidation of three former state-owned TABs, Australia's gambling industry would undergo a considerable change.|
After continued market speculation about a merger between gambling companies Unitab of Queensland and NSW-based TAB yesterday, both groups were forced into a trading halt. Unitab admitted this week, that the two groups had held 'intermittent' talks.
Based on 2003 full-year earnings, Goldman Sachs JB Were estimated consolidation of Unitab and TAB's wagering pools would realise combined turnover of about $7.2 billion, compared to about $2.6 billion for Tabcorp. Unitab is the smaller of the two groups. It incorporates the former South Australian and Queensland TABs and outlets in the Northern Territory. Its market capitalisation is around $900 million, compared with TAB's $1.5 billion.
The new company is likely to be based in Queensland, would create Australia's largest wagering pool. The merger is expected to involve equity swap and effective reverse takeover of TAB by the much smaller Unitab.
Queensland Premier Peter Beattie is expected to update Parliament today. It is believed he has met both parties and reached a solution to legislative impediments, such as Unitab's 10 per cent shareholder limit.
Tabcorp executive general manager of wagering Michael Piggott said the scope of impact has not been ascertained. However, analysts say a merger would deliver massive synergies to the east-coast wagering rivals, with combined savings of about $25 million per annum. Cost reductions and savings would be on account of call-center staff reduction which, combining the companies' Internet sites and voice recognition technology, and reducing head office overheads.
The tie-up faces won't be smooth or seamless. It faces several legal hurdles, like the 10 percent cap on the number of shares that a single investor can hold in UNiTAB and the Queensland Government's requirement that the new entity be based in that state. Enforcing that could see Tab's headquarters move from NSW.