Tabcorp has locked in a 50-year, low tax wagering licence in its $105.5 million deal to buy ACTTAB, which it can use as a bargaining chip in licence negotiations or to boost profits in future, analysts have said.
As the winning bidder in the privatisation of the national capital’s wagering business, Tabcorp will receive a 50-year totalisator licence, a 15-year sports bookmaking licence and approval to offer its Keno and Trackside products.
Unlike in Victoria and NSW, where Tabcorp is the exclusive retail wagering provider, in the ACT the company will have minimal tax liabilities on betting.
Tabcorp will pay a $1 million annual fee for the totalisator licence and a tax of 1 per cent of sports bet turnover. It will pay no tax on tote betting.
CLSA analyst Sacha Krien said the licence gives Tabcorp leverage in negotiations with the Victorian government when its licence in that state runs out in 2024. “Tabcorp controls account details for Victorian customers, so the company could effectively shift accounts to the low-cost ACTTAB without any change in the experience for phone and internet customers,” Mr Krien said, conceding Tabcorp would sacrifice retail operations in the state.
JP Morgan analyst Matt Ryan said the low-cost licence gives Tabcorp “optionality” on where it directs its betting revenue from customers who reside outside of NSW and Victoria. “Strategically it’s a strong choice because it gives them a low cost avenue of betting going forward,” he said.
Chief executive David Attenborough said minimising tax did not inform the rationale. “This business was bought because the licence was up for sale, and it is a natural fit to our business,” he said.
Tabcorp said it would take one year to integrate ACTTAB and after this it would contribute $14 million to earnings before interest, tax, depreciation and amortisation.
ACTTAB is a small bolt-on for Tabcorp. The annual amount bet by Territorians, about $170 million, is less than what Tabcorp takes in on Melbourne Cup day - its busiest day of the year.
ACTTAB’s 53 outlets and online offering would benefit from Tabcorp’s scale, Mr Attenborough said. “It’s been well run but it’s always been a small business,” he said.
CIMB analyst Killian Murphy said the acquisition gives Tabcorp “flexibility” in negotiations, but otherwise it was not the best deal. “The market is moving towards fixed odds and online,” he said. “We would have preferred to have seen $100 million invested in that side of the business.”
Tabcorp’s share price was up 1.2 per cent at $3.50 in afternoon trading. The stock is down from a 12-month high of $3.80 hit in May
