Tattersall's Ltd, Australia's largest lottery operator, agreed to buy Unitab Ltd for A$1.9 billion (US$1.3 billion) in stock to gain control of the country's second-biggest chain of sports betting shops.
Investors in the Brisbane-based company will get stock worth A$14.25 for each Unitab share, Melbourne-based Tattersall's said in a statement today. Shares of Unitab surged 13 percent to A$15.71 as investors bet on a higher bid.
Australia's seventh gaming takeover since 2003 would enable Tattersall's chief executive officer Duncan Fischer to add sales and reduce costs less than a year after taking the 120-year-old company public.
The purchase would close the gap with Publishing & Broadcasting Ltd and Tabcorp Holdings Ltd, leaving the three companies with more than half of a A$16.2 billion gaming market.
"Tabcorp might decide to come back and have a bid as well," said Sean Fenton, who helps manage the equivalent of US$670 million at Jenkins Investment Management Ltd in Sydney.
Tattersall's shares gained 7.2 percent to A$3.29 at the 4:15pm market close in Sydney. The stock had fallen 1 percent before yesterday from the price paid by institutional investors in last year's initial public offering.
The company is prepared to pay A$14 a share in cash for about a third of Unitab, it said.
The new company will own 13,750 slot-machines, 1,150 off-track betting shops and operate lotteries across five Australian states, South Africa and the Pacific Islands, the statement said.
It will have annual sales of A$3 billion, giving it about 18 percent of Australia's gaming market. Earnings before interest, tax, depreciation and amortization at the combined company are forecast at A$400 million, Tattersall's said.
The company will control about 30 percent of the national lottery market and 22 percent of wagering with stakes in gaming venues in the UK and South Africa.
Fischer is buying Unitab amid higher taxes on his slot-machines and a review of his lottery and gaming licenses that may see him face new competition.
Tattersall's monopoly license to run lotteries in Victoria, Australia's second-most populous state, expires June 30, next year, with the government yet to decide whether it will renew current arrangements, award the permit to another company or allow multiple operators.
"For Tattersall's it removes a possible bidder for its gaming license," said Richard Wallace, who manages the equivalent of US$102 million, at Wallace Funds Management in Sydney. "We think it's an opportunistic bid."
Tattersall's bid has put Unitab "in play" and may prompt Tabcorp or other bidders to make their own offer, according to Macquarie Equities.
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