Tabcorp still hopes to put its merger with rival Tatts to a shareholder vote in mid October as planned, despite Wednesday’s Federal Court decision to refer the deal back to the Australian Competition Tribunal for a rehearing.
If the Tribunal can reach a new determination by next Thursday, September 28, Tabcorp said it expects shareholders to still have their say on the deal at the planned Scheme Meeting on October 18.
The proposed $11 billion merger (which now worth less than $10 billion given the 10% plus slide in the Tabcorp share since the bid wes announced 11 months ago) was cast into doubt on Wednesday afternoon following a successful appeal against the ACT decision by the Australian Competition and Consumer Commission.
Justice Nye Perram sound in favour of the Australian Competition and Consumer Commission’s claim that the Australian Competition Tribunal (ACT) had made reviewable errors in allowing the merger to proceed.
The court set aside the tribunal’s decision and ordered it to reassess the bid.
In statements to the ASX on Thursday morning, Tatts and Tabcorp said the ACT had advised the parties that "it wishes to further consider and determine the matter as soon as practically possible".
"In this regard, the tribunal is of the tentative view that the parties and participants file with the tribunal, and serve on the other parties and participants, written submissions relevant to the remittal to the tribunal on or before 4.00pm on Monday," the statements said.
Federal Court judge John Middleton, overseeing the competition tribunal, wrote to the parties on Wednesday night saying he would fast-track the process and would take only written submissions before delivering the new determination.
“If the issues in contention are narrow in scope, the tribunal would endeavour to make a new determination by 28 September 2017 after considering the submissions of the parties and the participants," the companies’ statements said.
But the Federal Court later released its reasons.
Fairfax Media reported “the court determined that the approval process should be widened to include an examination of arguments led by ACCC about the potential “lessening of competition in the wagering services market”.
"The ruling said it appeared that the tribunal had "embarked upon a process of reasoning which had the unfortunate side effect of causing it to overlook the ACCC’s case on detriment", and it did not seem the tribunal had dealt with the ACCC’s "more confined case".
"The court rejected two other grounds for appeal set out by the ACCC. “The ACCC is entitled to succeed, but only on its first ground,” the ruling said,” Fairfax reported.
Media reports this morning suggest that some parties may seek a month’s delay in the ACT next week, which would push the timeline out past the meeting date.
CrownBet, owned by James Packer’s Crown resorts, supported the ACCC’s legal action and if the ACT again finds in favour of the merger next week, it is likely we will see more appeals – possibly from the ACCC which is miffed at the decision to buy pass it by the companies and their advisers and by CrownBet.
But the deal’s future hangs not so much on the court moves, but on the Tabcorp share price. The Deal when announced on October 18 last year was based on a Tabcorp share price of $4.89, which valued (with the cash and share offer) a Tatts price of $4.34.
Tabcorp shares have fallen to $4.18 yesterday down 2.6%) and Tatts shares have slid to $3.98 (down 2.3%).
Market talk is that more and more big Tatts shareholders are unhappy at the slide in the Tabcorp share price and want the terms recast.
Even if it gets to the shareholders of Tatts, it will not only need the yes vote of 50% of shareholders present at the meeting, but 75% of the votes cash in favour of the scheme of arrangement. That is starting to look shaky judging by references to the issue in the business media.
