Tabcorp counsel: Deal is good for all concerned
The Australian Competition and Consumer Commission has officially come out against the proposed merger of Aussie gaming firms Tabcorp and the Tatts Group, which would create a business worth about AU$11 billion (US$82 billion).
According to the Australian, the ACC’s Andrew McClelland refuted Tabcorp’s contention that the merger would be beneficial to the public. McClelland said the purported cost savings were “inherently implausible” and “speculative.”
“Although Tabcorp has asserted that some of these cost savings and revenue increases will flow through to the community, the majority of the claimed synergies are proposed to be retained by Tabcorp and should be given little weight,” McClelland said. “The competitive constraint Tabcorp and Tatts impose on each other will be lost with the proposed acquisition and will likely give Tabcorp the ability to increase yields.”
Tabcorp has announced plans to sell its Odyssey gaming machine monitoring business to ameliorate monopoly concerns.
The ACC’s stance against the merger is not binding; the decision will be made by the Australian Competition Tribunal in the coming week.
The ACC also voiced concern that the combination of Tabcorp-owned Sky Racing with Tatts would increase the group’s market dominance in its dealings with licensed venues and racing media rights holders. The companies are the biggest funders of Australia’s racing industry and contributed about $1 billion in the 2016 financial year, as well as more than $200 million in taxes to state governments, reported Yogonet.com.
Tabcorp counsel Cameron Moore SC said the merger is the only way the big operators can remain economically viable because globally, they’re minor players. “There is a really material gap now in the likes of Bet365, Paddy Power and Betfair at a global level, and what are effectively becoming small local players like Tabcorp and Tatts. As technology gets more sophisticated, the investment required to create the quality product increases.”
Moore said it will become increasingly hard for smaller firms to compete “because they have a much smaller customer base to get a return from that investment.”
“In addition to cost synergies, to the extent we can slow the relative decline in our businesses and the absolute decline in tote, this is good for the racing industry because we give more support to the industry, and the racing industry, of course, is a very important industry in Australia,” Moore said.
