TABCORP could sell its online betting business Luxbet due to poor performance over the last 12 months.
The Australian gambling giant is attempting to complete an $11 billion merger with Tatts lottery giant, despite facing a number of regulatory hurdles.
But Tabcorp’s yearly results have shown that Luxbet has not done as well as the TAB and it may be sold following the Tatts takeover.
Tabcorp chief executive, David Attenborough, said while Luxbet is a good business it effectively runs on “starvation rations” given Luxbet recorded an EBITDA loss of $8m and an EBIT loss of $13 million.
“We’ve got the strategic review and we will see what we do after that,” he said.
“But it (Luxbet) has been partially handcuffed and going into the Tatts combination it could be handcuffed some more.”
While Attenborough has not commented on whether the company would sell Luxbet, two months ago he suggested that some Australian betting brands might be closed to secure the merger.
If Tabcorp plans to sell Luxbet, the next question is whether the company should close the betting business or sell it to an offshore operator. Overseas corporate bookmakers are likely to be interested due to the connections to the multi-billion-dollar Australian horse racing industry.
Luxbet was launched in 2008 by Tabcorp to compete with online bookmakers licensed by the Northern Territory. The business recorded a positive performance over the years and even owned 10 percent of the corporate bookmaker market at one point.
Sun Bets, Tabcorp’s UK joint venture with the Sun, also failed to perform. Although the company recorded an operating loss of $47.6 million over the past 12 months, Attenborough said he is positive about its future.
“Following operational review, several initiatives have been implemented including changes to leadership, team size and commercial arrangements to improve the positioning of the business for FY18,” Attenborough said in his FY17 results presentation.
Tabcorp has planned marketing initiatives for Sun Bets, indicating the gambling giant is unlikely to sell its stake in the UK joint venture if the Tabcorp-Tatts merger goes through.
Attenborough said he is positive about the future of the Tatts tie-up and the transaction is expected to be “completed by the end of 2017″.
Attenborough added that the merger will be the company’s main priority going forward, with a scheme determined by Tatts shareholders in October.
Although the Australian Competition and Consumer Commission and CrownBet have both appealed the Australian Competition Tribunal’s decision to approve the tie-up, Attenborough believes the court will not block the deal.
The Federal Court will hear their applications on August 28 and 29.
Corporate bookmaker CrownBet believes that the merged entity would weaken competition since it would have monopoly over every state except Western Australia.
Additionally, the challenges for corporate bookmakers could be emphasised once the Interactive Gambling Amendment Bill 2016 becomes enforced.
The legislation will impact the entire Australian gambling industry and is likely to affect corporate bookmakers significantly due to the credit betting ban.
William Hill Australia recently released its yearly results revealing poor performance after in-play betting became banned earlier in the year. The Northern Territory-licensed company said 30 percent of its business relies on credit betting.
Corporate bookies were also affected by the point of consumption tax which was enforced in South Australia on July 1. CrownBet and Sportsbet have reduced their promotion of South Australian racing as a result.
The corporate bookmakers are already repositioning to fight the impending changes, including gambling advertising restrictions. If the Federal Court dismisses the appeals, they will then have to compete with the merged entity.
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