The creation of TabTatts is looking more and ore unlikely – at least based on the terms announced on October 18 last year.
Then the terms were 0.8 of a Tabcorp share each, plus 42.5 cents for each Tatts share owned.
At the time Tabcorp shares were trading at $4.89, valuing each Tatts share at $4.34.
Yesterday Tabcorp shares closed at $4.29, down 3% and Tatts shares closed off 2.7% at $3.95.
That gave a vale for each Tatts share of $3.785, or down 12.7%. Including debt, the merger would have created a company worth around $11.3 billion.
Based on the market values of both companies at the close yesterday that is now around $9.3 billion.
That indicates that investors reckon the original terms will have to be adjusted upwards to favour Tatts shareholders, or it won’t proceed.
The falls yesterday came as investors increasingly accepted that the timetable set down by Tabcorp and Tatts to execute the merger has blown out despite Tuesday’s win in the Competition Tribunal on Tuesday.
Justice John Middleton, the president of the Competition Tribunal, granted Tabcorp a speedy re-hearing of its application to approve the merger over the protests of the competition watchdog and James Packer-backed corporate bookmaker CrownBet (owned by Crown Resorts).
However, the dates set down by Justice Middleton — October 24 and 25 — fall after a proposed meeting where Tatts shareholders are to vote on the deal, on October 18, and clash with the date by which Tatts hoped to get court approval, October 24.
The meeting and court approval date will need to be rescheduled, Justice Middleton said.
“This is unavoidable because the tribunal must consider all matters that need to be considered now that the matter is back before the tribunal,” he said.
The deal has to be done by December 31 or it lapses. An appeal by the ACCC from the next decision by the Competition Tribunal will sink the deal because it won’t be heard until early in 2018.
But the price of Tabcorp shares have been falling steadily in recent weeks, driving down the price of Tatts shares as investors increasingly question the terms and rationale for the deal at these price levels.
