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UPDATE 2-Australia's Tabcorp to spin-off Lotteries & Keno business

(Adds share price; Entain, analyst comments)

July 5 (Reuters) - Australia’s Tabcorp Holdings Ltd said on Monday it would spin off its Lotteries & Keno business into a listed entity, drawing an end to a company-wide review it undertook earlier this year as interest built for a separate unit.

The company’s shares closed down 4.4% at A$4.97, their lowest in nearly three weeks.

The demerger will create two listed-companies, Lotteries & Keno (L&K) and Wagering & Media (W&M), the latter being the target of buyout offers from Entain, Apollo Global Management Inc and Betmakers Technology Group.

Credit rating agency S&P Global Ratings said it believed the demerger of Tabcorp’s lotteries arm would “materially reduce its earnings quality, scale, and diversification” and its wagering unit would be up against strong international competition.

British sports betting firm Entain said it was "disappointed" by Tabcorp's decision to go ahead with the demerger of its lotteries business. (bit.ly/3Awn6oz)

“We believe our all-cash offer would have delivered superior outcomes for shareholders, customers, employees and the wider industry,” Entain added.

In late March, Tabcorp undertook a review that looked at potentially spinning off either business or selling the W&M arm.

The company said it considered proposals to sell the W&M business, and “concluded that a demerger of Lotteries & Keno is the optimal, and most certain, path to maximise the value of both businesses for Tabcorp shareholders”.

Tabcorp said selling the W&M arm, which was hit hard by the halt to sporting events and closure of betting shops due to the pandemic, would have involved several regulatory approvals that were uncertain and could take a long time.

However, the company said it remained open to future engagement with bidders on revised proposals. (Reporting by Sameer Manekar, Harish Sridharan and Nikhil Kurian Nainan in Bengaluru; Editing by Christopher Cushing and Shounak Dasgupta)

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