WA TAB privatisation back on the agenda

The Western Australian government is once again considering the sale of its TAB services after several prior attempts.

In a sale which could generate $500 million for the state, several banks have reportedly pitched offers to the WA Treasury.

But Citi analysts have picked Tabcorp and Tatts as the best candidates to acquire the WA TAB due to their retail experience.

If either company is successful, and if Tabcorp and Tatts merge, the entity will have a monopoly over retail services in every state and territory in Australia.

The Australian Competition and Consumer Commission (ACCC) has highlighted this potential scenario in its attempt to block the merger, citing weakened competition in the gambling industry.

In 2014, the former Barnett government began discussions regarding the sale of the WA TAB, which is run by Racing and Wagering Western Australia (RWWA). The sale never went through due to strong opposition from the racing industry.

According to the Australian Financial Review, the states gaming minister has opened up discussions again with the racing industry, while the McGowan government is looking to appoint an adviser on the sale in the coming days.

“As we have said before, any sale of the TAB would be contingent on it being in the best interests of the racing industry in this state,” a spokesman for Treasurer Ben Wyatt said.

Although Premier Mark McGowan has been open to the sale of the TAB for some time now, he said in May it could negatively impact the state’s credit rating.

But the government needs to fill in the gaps in the budget to alleviate the debt and deficit its predecessor incurred.

It’s not clear exactly how much revenue the TAB sale will generate for the state, with Citi estimating it to be valued at $500 million based on zero tax and a long-term licence. Credit Suisse has valued the sale at around $250 million.

There will likely be a funding model to compensate the racing industry, which will need to be considered when estimating the value of the sale. The funding model would have to mirror the TAB profits and any transaction would need to be supported by the industry.

Earlier this month, the WA TAB reported $152.2 million had been pumped into the State’s racing industry this year.

Racing and Wagering WA chief executive, Richard Burt, revealed to The West Australian that figures had risen by $6.1 million due to cost-cutting, a sports betting campaign and stellar risk management on fixed-odds betting.

But a drop in total value has resulted in a $1.4 million decline in wagering tax delivered to the state government.

“It’s been a tough year, so in a pretty flat economy it’s nice to be going up,” Burt said.

“The industry should have confidence that the governance, integrity, welfare and the financial aspects are being well managed.”

But Mr Burt said the numbers provided a clear standard for the government if it chooses to sell the TAB.

“If privatisation was to occur, you’ve got a high funding level which should be the base of any future agreement,” he said.

“We will keep our eye on lifting that bar to make sure it becomes a minimum funding obligation should there be an acquisition by a third party.”