Tabcorp confident Tatts deal will be completed by end of the year

Tabcorp is not fazed by the recent challenge against the Tatts merger by Australia’s competition watchdog.

In fact, the Australian gambling giant is confident it will complete the deal by the end of the year.

On Monday, we reported the Australian Competition and Consumer Commission (ACCC) submitted an appeal to the Federal Court of Australia.

The ACCC’s application challenges the Australian Competition Tribunal’s approval of the Tabcorp-Tatts $11.3 billion tie-up.

Tabcorp recently responded in a media release stating the company “will oppose the ACCC’s application and will pursue an expedited hearing.”

“Tabcorp notes that the ACCC has stated it has made the application to the Federal Court to seek to clarify the law as it applies to all merger and non-merger authorisations,” the media release says.

“The factual findings by the Tribunal of substantial public benefits and of no, or insignificant, detriment arising from the Transaction are not in issue in the judicial review application.”

Tabcorp added that both businesses remained “committed to the transaction”.

Still, Tabcorp has notified shareholders that “the ACCC’s application will impact the timing and implementation of the transaction, though the precise impact will not be known until the court has considered the matter.”

“Tabcorp considers that implementation remains achievable in the last quarter of 2017,” the company said.

The appeal by the ACCC is the first of its kind and chairman, Rod Sims, is arguing the Tribunal made three errors in its judgement, including properly weighing up the public benefits.

The Tribunal handed its decision down on June 20 where it concluded the merger had “substantial” benefits to the public and “no material detriments weighed in the balance which are of significance or likely to arise that outweigh the benefits”.

But according to Tabcorp, even if the ACCC’s appeal is successful and the matter is sent back to the Tribunal, proceedings would not start from the beginning.

In an update regarding the Tabcorp’s trading performance, the company revealed it expected “the Tatts Scheme First Court Hearing to be scheduled for mid-July 2017, with the Scheme Booklet to be dispatched by Tatts shortly thereafter.”

But this timeline is likely to change due to the appeal.

Deutsche Bank analyst, Mark Wilson, believes the booklet will not be released until the appeal is resolved.

“While we remain confident that the proposed merger will eventually be completed, the appeal is likely to delay the targeted completion date and there remains a possibility that any such approval could be subject to conditions,” he said.

Delays could result in other offers being put forward to Tatts, but whether the company will consider them is not known.

Pacific Consortium first submitted a bid to acquire Tatts last year when Tabcorp announced its interest, but Tatts deemed the latter bid the best deal on the table.

During the merger proceedings between Tabcorp and Tatts, Pacific Consortium submitted a revised all-cash offer but Tatts still preferred the advantages the Tabcorp tie-up delivered.

It’s not clear if the consortium will submit another offer due to the transaction delays.