Tabcorp Holdings (TAH) has moved a step closer to a successful clearance from regulators for its $6.4 billion bid for rival gaming and wagering group, Tatts (TTS).
That’s despite the Australian Competition and Consumer Commission (ACCC) raising concerns about the poker machine monitoring business in Queensland and racing coverage on Tabcorp’s Sky TV.
As a result of those concerns, Tabcorp has offered to sell its Queensland electronic gaming machine monitoring business to address the competition concerns.
The Commission said its preliminary statement on the proposed takeover, released yesterday that was “likely to substantially lessen competition” in Queensland in gaming machine monitoring, which is a small part of Tabcorp’s business.
But the encouraging news for the two parties and many investors is that the Commission also said it is satisfied punters have plenty of choice over where to place their bets (which is the substantive part of both companies operations and where they are facing the greatest competition from online gaming (mostly overseas) operators).
Tabcorp is the monopoly provider of retail betting outlets in NSW Victoria and ACT, while Tatts is the operator in all other states except Western Australia. On the face of it the combined company would have a stranglehold on punting on horses, trots, dogs and sports betting.
But the Commission made it clear in yesterday’s release, that it was confident , the rise of online bookmakers like Sportsbet (Paddy Power), Ladbrokes, William Hill and Crownbet means a merger would not reduce competition in wagering.
The Commission says the $26 billion wagering industry is still dominated by Tabcorp and Tatts Group, but the online wagering is around $13 billion and growing, and is shared more broadly among the newer, mostly foreign-backed players.
“It is our view that strong competition between online corporate bookmakers will mean recreational customers will continue to have choice about where to place their bets,” ACCC chairman Rod Sims said in yesterday’s release.
The ACCC notes there is limited competitive overlap between the retail (i.e. bricks and mortar) wagering operations of the merger parties which are exclusively held in separate states and territories. The ACCC considers Tabcorp and Tatts primarily compete for online and telephone customers.
“It is our view that strong competition between online corporate bookmakers will mean recreational customers will continue to have choice about where to place their bets,” Mr Sims said.
A further focus of the ACCC’s investigation is whether the proposed merger will affect the ability of competing wagering providers to obtain key inputs including pooling arrangements and access to racing vision. But the Commission did not give the greenlight yesterday because it is concerned about the competition levels in the Queensland gaming machine market and monitoring and Tabcorp’s ownership of racing broadcaster Sky Racing.
“The ACCC’s preliminary view is that the proposed merger is likely to substantially lessen competition in the supply of monitoring and other services to pokies venues in Queensland.”
The ACCC says, given these concerns, Tabcorp has recently provided the ACCC with a divestment proposal to sell its Queensland electronic gaming machine monitoring business, Odyssey. The ACCC is seeking comment on this divestment proposal.
Mr Sims also said a consideration is “whether the combination of Sky Racing and Tatts is likely to materially increase the market power currently held by Tabcorp in its dealings with licensed venues and racing media rights holders.”
Tabcorp shares rose 2.2% to $4.45. TTS shares rose 2.4% to $4.18. Tabcorp is offering $4.34 for each TTS share.
