By Ian Neubauer
Tatts Group and Tabcorp have hinted at a possible merger of their wagering businesses to make the companies more competitive and provide larger pools for customers.
The revelation follows a May announcement by the Victorian Government that the state would move to a new industry structure under which the companies’ gaming duopoly would come to an end and be replaced by venue-based gaming on July 1, 2012.
The announcement slashed billions of Tatts Group and Tabcorp stocks and forced both companies to look at new ways of doing business. And while claiming direct talks have not yet been held, the CEOs of both companies were yesterday reported to be spruiking the benefits of a merger.
“We’re both aware that there’s great benefits from putting parts of our companies together,” Tatts Group CEO Dick McIlwain told the ABC.
“We’ve seen that through the consolidation that’s already occurred in the industry, particularly our consolidation in South Australia and the lotteries consolidation back into Queensland. These businesses lend themselves to consolidation. Also, the ACCC [Australian Competition and Consumer Commission] incidentally seems to buy the idea that bigger pools are better for customers.”
Tabcorp CEO, Elmer Funke Kupper, voiced similar sentiments. “On the wagering front, creating a national pool in light of much stronger competition makes a lot of sense,” he told The Australian Financial Review.
“That was an idea we had a couple of years ago. From a competition perspective, this is probably a lot more do-able than it ever was,” Kupper was reported as saying.
The companies’ stocks did not rally following reports of the possible merger yesterday. At 2:00pm on Monday Tabcorp shares were trading at $9.56 while Tatts Corp shares traded at $2.39.