ACCC chairman Rod Sims. Photo: Jesse MarlowThe planned merger between Tatts Holdings and Tabcorp Group to create a $10 billion gaming behemoth raises “major concerns”, according to the chairman of the Australian Competition and Consumer Commission.
ACCC approval is proving a major hurdle for a merger deal, the details of which are expected to be released on Wednesday after Tatts and Tabcorp exit their respective trading halts.
The potential tie-up is expected to also face scrutiny from state governments.
Tatts and Tabcorp are expected to present a merger of equals to shareholders, where both entities will end up with a 50 per cent stake in the combined entity.
Speculation is now focusing on who will take the reins at the merged group, with some in the market tipping Tatts chief executive Robbie Cook as the boss of the merged group over Tabcorp chief David Attenborough and Tabcorp chairman Paula Dwyer pipping Tatts chairman Harry Boon to the role of chairman of the combined entity.
A tie-up would also need to deal with Tabcorp’s legal issues. The company is currently subject to legal action from the Australian Transaction Reports and Analysis Centre for 236 breaches of anti-money laundering laws after it failed to tell the regulator TAB accounts had been opened under false names and used by organised crime figures.
On Tuesday, ACCC chairman Rod Sims said it was very early in the process, but the regulator would be looking at the role of online gaming in potentially competing with a merged entity made up of Tatts and Tabcorp.
“Clearly there’s a lot of overlap between what Tatts and Tabcorp do. I’m aware of a lot of overlap, I probably don’t know the industry well enough to know the extent of it. So on the overlap issue there’s major concern,” he said at a conference in Sydney.
Mr Sims said the ACCC would also weigh up whether there was enough new online competition to “constrain” the merged entity.
“That’s going to depend on breaking into certain markets,” Mr Sims said.
Both Tatts and Tabcorp supply fixed-odds and sports wagering services and Tabcorp operates the Victorian and NSW totaliser pools (TAB) while Tatts operates UniTAB, the totaliser for Queensland, South Australia, the Northern Territory and Tasmania. Poker machines and lotteries/Keno are also an area of potential concern, an ACCC spokeswoman said.
A spokeswoman for the Victorian government said it would consider the implications of a merger when more information was available.
The Victorian government’s review is expected to focus on the implications the merger would have on their compliance with the Gambling Regulation Act.
Both companies hold separate licences in Victoria and it is unclear whether one of the cost savings of the merger would be cancelling one of those licences and whether the Act would allow for a change of control of the licence.
Queensland Racing Minister Grace Grace said she was concerned about potential job losses resulting from the merger.
“That’s why I’ll be seeking assurances about its potential impacts on workers and industry participants, and that any merger will help to grow and prosper racing in Queensland,” Ms Grace said.
A spokesman for the NSW government said it was a matter for the companies involved.
In late 2015, both companies walked away from a tie-up deal after Tabcorp’s share price fell and the parties were unable to agree to a merger ratio.
The combined group could create savings of up to $100 million a year, or $1 billion over 10 years, through consolidating IT platforms and administrative functions, staff cuts and consolidating into a single head office in Brisbane or Melbourne.
Analyst sources said a combined entity would be able to share its customer databases, potentially providing new streams of revenue.
“It would also have a greater ability to invest offshore,” one analyst, who declined to be named, said.
The merger talks come just a week after NSW overturned its ban on greyhound racing, which represents about 5 per cent of Tabcorp’s total wagering turnover. Tatts has a much smaller exposure to the NSW greyhound racing industry.