Tabcorp may have to sell Sky Racing for Tatts merger approval

If Tabcorp wants the $11 billion merger with Tatts to get the green light, it may have to sell Sky Racing.

Reports are suggesting the Australian gambling giant, which dominates the retail wagering sector, will have to sell its broadcasting service if it wants to be given approval by the Australian Competition Tribunal to acquire Tatts.

Billionaire media tycoon, Kerry Stokes, the telecommunications company, Telstra, and pay TV giant, Foxtel, have all reportedly shown interest in purchasing Sky Racing if it is up for sale.

The 14-day hearing held over the last three weeks did not go as well as Tabcorp planned after it ignored the Australian Competition Consumer Commission (ACCC) informal process and went straight to the Tribunal.

Strong arguments presented by rivals against the merger were based on competition concerns, with vision rights a predominant factor.

Seven West Media and Racing Victoria’s joint venture, Racing.com, raised the issue of Sky Racing hoarding vision rights if the merger does go through since Tabcorp has a strong pull and the addition of Tatts retail outlets would give the entity even more power.

Tabcorp secured the multi-channel broadcaster, which airs more than 100,000 thoroughbred, greyhound and harness races each year, when it took over Tab Limited from the NSW government in 2004.

While the Tribunal will hand its decision down on June 13, many are betting it will not be approved, especially since the ACCC formally advised against the Tabcorp-Tatts tie-up in its closing statements.

A number of conditions were suggested for the Tribunal to consider if it does approve the billion-dollar merger, but selling its Sky Racing subsidiary was not one.

Instead, the conditions included the prevention of Tabcorp from stopping its services with pubs and clubs which enter an alternative media agreement.

Still, many have suggested the divestiture of Sky Racing will be the only thing to get the Tatts acquisition approved, while others have suggested Tabcorp would walk away.

Tabcorp was offered $400 million in 2011 by ThoroughVision (TVN) to acquire Sky Racing, a proposal which it rejected. TVN was owned by Country Racing Victoria, three Victorian metropolitan clubs, and the Australian Turf Club but closed in 2015.

“Tabcorp has never contemplated and is not contemplating the sale of Sky Channel,” a Tabcorp spokesperson said regarding the offer around six years ago.

Tabcorp may also be against the sale if Stokes was a contender as he would emerge as a major competitor and the merged entity would not stand a chance, deeming the tie-up redundant.

Seven West Media – which Stokes chairs – already has dealings with the gambling industry with bookmaker advertisements supporting the network. Stokes is also a contender for the Western Australian TAB, should it be sold by the state, which would harmonise the acquisition of Sky Racing.

Telstra, which offers Telstra TV and owns half of Foxtel, could be considered as an alternative to Stokes as the company looks to increase its customer base – if Tabcorp goes through with it.

Tabcorp already sold off Odyssey – its Queensland electronic gaming company – to alleviate competition concerns from the ACCC and get the merger rolling. Whether or not this was enough will be determined in the coming days.

There is also speculation the Tatts Group may have to do some selling of its own. The company’s Maxgaming pokies monitoring business may need to be sold for the merger to go ahead, which has been estimated to be worth at least $600 million.