* Consortium cash bid rivals cash-and-scrip offer from
* Tatts board assessing the consortium proposal
* Consortium proposal subject to board backing
(Recasts, adds shareholder and bidder comments)
By Jamie Freed
SYDNEY, April 19 A group backed by private
equity firm KKR & Co on Wednesday said it had made a
revised A$6.15 billion ($4.65 billion) offer for Australia's
biggest lottery operator Tatts Group Ltd, upping the
ante in a bidding war against Tabcorp Holdings Ltd.
Both proposals are valued at less than Tatts' trading price
and shareholders are divided over whether the board should
favour the KKR-led all-cash bid over Tabcorp's cash-and-scrip
offer and allow the U.S. firm to do due diligence.
KKR-backed Pacific Consortium's bid of A$4.21 a share
compares with the A$4.209 offered by Tabcorp based on its
closing price on Tuesday. Tatts shares were trading A$0.03
higher at A$4.38 on Wednesday.
"We would like to see Tatts grant due diligence," Gabriel
Radzyminski, managing director of activist investor Sandon
Capital said. "Not because we like the Pacific Consortium offer
at the moment but because we want to see if they can increase
Tatts is a prized asset given the lucrative and reliable
earnings from its lotteries business, which benefits from
monopoly licences. It also owns a smaller wagering business that
competes against Tabcorp, the nation's largest betting operator.
Australia offers the likes of KKR a rare opportunity to own
this type of business, as in most countries lotteries remain in
Charlie Green, a director at Hunter Green Institutional
Broking, which owns Tatts shares, said the board had enough
grounds to reject the consortium bid as inferior to the Tabcorp
offer. Tatts rejected an earlier offer from the group in
"It is all cash, so there is no capital gains tax roll-over
relief," he said of the Pacific Consortium offer.
"There are no synergies available for Tatts shareholders.
The great advantage of the Tabcorp bid is that Tatts
shareholders get to share in the upside."
PROS AND CONS
Brisbane-based Tatts said it was assessing whether Pacific
Consortium's bid was superior to the Tabcorp deal agreed in
October, which Tatts and Tabcorp touted as having A$130 million
a year in synergies.
A Tatts-Tabcorp merger would form a gambling powerhouse that
would help both companies fend off a challenge from overseas
online rivals such as Britain's William Hill PLC and
Ireland's Paddy Power Betfair PLC that have made huge
strides into Australian wagering in recent years.
Pacific Consortium also includes Macquarie Group Ltd
, Morgan Stanley Infrastructure and First State
The group said it had obtained indicative equity commitments
of A$4.6 billion and conditional debt financing for the
remainder. The proposal is subject to the unanimous
recommendation of the Tatts board.
Pacific Consortium Chairwoman Kerry Schott said the all-cash
proposal provided greater certainty for investors and was free
of competition issues. The Tatts-Tabcorp merger has yet to be
approved by the Australian Competition Tribunal.
A Tabcorp spokesman declined to comment.
($1 = 1.3226 Australian dollars)
(Reporting by Jamie Freed; Editing by Stephen Coates)