By Ian Neubauer

Three billion dollars have been wiped off the value of gaming giants Tabcorp and Tatts Group after the Victorian Government announced it intends to revoke their poker machine licences after 2012.   

Tabcorp shares, which were trading at $14.37 prior to the announcement, lost 25 per cent of their value to reach $10.78 at noon today. Tatts Group shares, which were trading at $3.66 on Thursday, lost 28 per cent of their value to reach $2.56 at noon today.

Both companies attempted to calm investors as the market continued to absorb the impact of the restructuring that will reduce the earnings of Tabcorp and Tatts Group by 25 per cent and 45 per cent respectively.

Tabcorp made an announcement to the Australian Stock Exchange (ASX) that risk assessor Standard & Poor (S&P) has maintained the company’s BBB+ rating.

“The reduced earnings from Victorian gaming will slightly weaken the company’s business diversity. However, its impact is mitigated by the broader business base the company has developed over the years,” S&P was quoted as saying.

Tatts Group released a statement saying it would adjust its approach to its existing Victorian business, pursue other opportunities proposed by the restructure and expand its business interest beyond the gambling sector.

“Tatts Group will be adjusting its Victorian business model to maximise the profits available from Tatts Pokies. This will include discontinuing capital expenditure by up to $40 million annually and gradually reducing business expenses.

"These strategies are expected to lift profits available from this business in the four years left under the current licence,” Tatts Group said. “In the meantime, it’s business as usual.”

The Shout Team

The leading online news service for Australia's beer, wine, spirits and hospitality industries.

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