William Hill & Ladbrokes enter the Tatts Group buyout battle

LADBROKES and William Hill are lining up to take control of Tatts Group’s racing and sports betting services.

Unsubstantiated reports in November touted Ladbrokes Coral as a potential suitor for Tatts, which is facing takeover bids from both Tabcorp and the Macquarie Holdings-led Pacific Consortium.

But Newscorp media reported on Monday that the UK betting giant and its chief rival have now registered definite interest as a result of the Pacific move.

Global interest in Tatts has boomed since it was revealed earlier this year that the Australian gaming giant was on the verge of a long-mooted merger with its arch-rival.

That deal is now in jeopardy, however, now that First State, Kohlberg Kravis Roberts, Macquarie and Morgan Stanley have joined forces in a $7.3 billion bid for Tatts.

While a Tatts-Tabcorp merger would see every branch of the two companies’ operations combined, all signs suggest the Pacific group is planning to divide the gaming and wagering services into separate sellable entities.

Tatts confirmed in a statement last week that KKR, Macquarie, et al had offered to pay between $4.40 and $5 per share – a significant hike on Tabcorp’s overall valuation, which has dropped from $4.34 to $4.10 per share.

It is understood that the consortium intends to split the share payment into a $3.40 cash return for Tatts lotteries and a scrip of $1 to $1.60 for the wagering business.

If that is the case, a successful Pacific bid would open the door for Hills, Ladbrokes and any other interested parties to duke it out for the rights to the Tatts wagering arm.

Some are backing the consortium to guarantee wagering shares at $1.60 apiece, in which case Tabcorp would have to raise its quote and kick off a bidding war in order to keep its merger hopes alive.

Our take on Ladbrokes and William Hill joining the Tatts tussle

It is no secret that both Ladbrokes and Hills want a bigger piece of the Australian wagering pie.

Each has steadily whittled away at the Tatts and Tabcorp market share since launching their Aussie brands a few short years ago.

A merger between the two local giants would make further expansion much more difficult, but the Macquarie move could be huge for the British bookies.

As only a handful of the country’s major betting operators remain 100 per cent Australian owned, some are worried about the implications of even more wagering profits heading overseas.

But think of the alternative: an all-conquering Tabcorp monopoly that strangles the life out of corporate bookies and leans on government favour to kill off any real competition.

Of the two options on the table at present, we know which one we prefer.