* KKR-backed consortium stops work on Tatts offer
* Competition tribunal due to rule on Tabcorp bid in mid-June
* Consortium could return depending on ruling: source (Recasts, adds statement from consortium)
By Jamie Freed
SYDNEY, April 28 (Reuters) - A group backed by KKR & Co said on Friday it would not undertake further work on a takeover offer for Australia's Tatts Group Ltd after its A$6.15 billion ($4.60 billion) cash bid was rejected by the lottery operator's board.
Tatts shares fell as much as 4.8 percent to A$4.23 after Pacific Consortium said it would halt work on its bid, lowering the prospects of a higher offer emerging to compete with an agreed deal between Tatts and Tabcorp Holdings Ltd.
Tatts is a prized asset due to its lucrative and reliable lotteries income and its monopoly licences. It also owns a smaller wagering business that competes against Tabcorp, the nation's largest betting operator.
"Given the current approach of the Tatts board the consortium does not intend to undertake further work on its proposal," Pacific Consortium Chairwoman Kerry Schott said in a statement.
The Tabcorp bid valued Tatts at A$4.249 at the close of trade on Thursday, compared with the A$4.21 price of the Pacific Consortium bid.
Tatts on Friday said it had determined the Pacific Consortium bid was not superior to the Tabcorp offer and therefore it could not offer due diligence access.
Australia's competition watchdog is due to rule on the Tabcorp offer in mid-June, unless the timetable is extended. A negative decision could trigger a new approach from Pacific Consortium, said a source familiar with the situation who was not authorised to speak publicly about the matter.
"I think everyone keeps their powder dry now until the Australian Competition Tribunal (ACT) decision," said Charlie Green, a director at Hunter Green Institutional Broking which owns Tatts shares.
The ACT will consider public interest benefits as well as the impact on competition in its decision on the Tabcorp deal.
"What happens if Tabcorp don’t get the approval and they have to pull out? Pacific sits back and says we don’t need to pay near what we did before,” said Gabriel Radzyminski, managing director of activist investor Sandon Capital.
"That is part of the risk for Tatts," he said, adding that he was disappointed Tatts did not offer due diligence access to the Pacific Consortium.
Pacific Consortium includes Macquarie Group Ltd, Morgan Stanley Infrastructure and First State Superannuation Scheme. Tatts in December rejected an initial proposal from the group.
Tatts and Tabcorp in October said their agreed merger would offer A$130 million a year in synergies.
A Tabcorp spokesman declined to comment. ($1 = 1.3392 Australian dollars) (Reporting by Jamie Freed; Editing by Stephen Coates)