Tabcorp Holdings Limited (ASX: TAH) shares edged lower today as rumours continue circulating about a potential demerger. By the market's close, the Tabcorp share price finished the day trading 0.22% lower at $4.60. In contrast, the S&P/ASX 200 Index finished Friday's session 0.79% higher.
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Tabcorp might take a punt on a successful demerger
The Australian reported yesterday that Tabcorp will be moving forward with a strategic review to assess a demerger of its wagering and media unit from its lotteries arm. Speculation of the move has been rife for at least a month. The newspaper claims as many as three bidders are keen to make a deal.
Tabcorp was expected to make an announcement regarding the demerger during its half-yearly update but gave very little away, citing that "details of any proposal remained confidential, and were indicative and non-binding in nature.".
Many believe the three bidders are Entain – owners of Ladbrokes, Apollo Global Management, and Blackstone. Rumours are Apollo's offer is somewhere between $3 billion to $3.5 billion. Entain has apparently offered $3 billion and left open the possibility for scrips.
According to The Australian's report, Entain CFO Rob Wood is confident of making a deal. He believes the biggest hurdle to acquisition would be from the board and not regulators, like the Australian Competition and Consumer Commission (ACCC).
Tabcorp's financial performance
For the six months ending 31 December 2020, Tabcorp reported a net profit after tax of $185 million. The result was 7% lower than the prior corresponding period (pcp).
Revenue declined by 1.5% on the pcp, while earnings before interest, tax, depreciation and amortisation (EBITDA) was down 6.2%.
The company attributed the poor performance to the COVID-19 pandemic. The group's CEO said at the time that while the results may have been disappointing, the company was "well-positioned for the second half…".
A closer examination of the results reveals why some Tabcorp shareholders are keen to sell off the wagering division of the betting behemoth. For the half year, Tabcorp Lotteries and Keno saw revenue increase 1.6% on the pcp. Its wagering division, however, saw revenues collapse by 51% on the pcp – totalling $73 million.
Tabcorp share price snapshot
Nearly one year ago, the Tabcorp share price reached a 52-week low of $2.07. Today's price represents a 122% gain since that time. Tabcorp shares are now almost at parity with their pre-coronavirus showing of $4.61.
Tabcorp has a market capitalisation of $10.2 billion.
