KKR In Eleventh-Hour Tatts Bid
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Judging by the immediate market reaction yesterday, the renewed bid for Tatts from the KKR led group, Pacific Consortium will suffer the same fate as the first approach - it will be ignored.
Pacific leaked its return to the fray to The Australian overnight Tuesday for a publicity splash yesterday and then followed up with the official announcement to the market.
The consortium, which includes private equity firm KKR, Morgan Stanley’s infrastructure arm and First State Super each with a 30% stake and Macquarie Group with 10% reworked the offer which values Tatts at $4.21 a share.
The offer could upset an agreed $11 billion tie-up between Tabcorp and Tatts. Tabcorp's November offer valued Tatts at $4.34 a share at the time but is valued at around $4.20 at current share prices. It is still waiting for regulatory clearance.
Tatts share price edged up 0.2% to $4.36, while Tabcorp shares were also up 0.2% on $4.74.
The consortium sweetened its original $8 billion cash-and-shares offer Tatts rejected last year with the revised all-cash offer which does not require regulatory approvals.
The consortium had been seeking a potential buyer for Tatts' wagering operations but has decided to proceed with an offer for the entire company.
The revised offer was pitched as more certain than Tabcorp's scrip and cash bid, in light of recent equity market conditions, and is believed to be subject to confirmatory due diligence.
The lack of any movement in the share prices of Tatts and Tabcorp tells us investors are not really interested at the moment and regard the new offer from Pacific as an opening gambit.
The $4.21 isn’t a simple offer - it may include a 25 cents a share special dividend, to be paid immediately prior to any deal being implemented (by Tatts), but would reduce the cash consideration of the offer to (at the moment) $3.96.
The 25 cents a share divie to be paid by Tatts will cut the cash cost to Pacific by 6%.
Tatts directors said in a statement to the ASX they continue to believe the proposed tie-up with Tabcorp is in the best interests of shareholders, and recommend this earlier deal in the absence of a superior proposal.
If the special divie is paid, it is not a superior offer as Tatts shareholders would expect to be paid that if the bid doesn’t happen - it is in effect their money.
Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.
At the AFR he was a finance writer, Finance Editor, News Editor and Chief of Staff. At the Nine Network he was supervising producer of Business Sunday for more than 16 years. He has also written for other online and analogue print publications here and overseas.