Tabcorp sidesteps the Australian Competition and Consumer Commission on Tatts merger

While the Australian Competition and Consumer Commission (ACCC) continued to deliberate the wisdom and impact of a merger between Australian betting giants Tatts and Tabcorp this week, the latter company appears to have taken a new and faster approach, on Monday filing an application with the Australian Competition Tribunal (ACT) for authorisation to proceed with the merger.

The company advised in a statement Monday that as a result of the filing, it has withdrawn its request for authorisation to the ACCC, which recently indicated that its in-depth study of the merger and its consequences could be lengthy and take until May this year.

Tabcorp supports its ACT application with the claim that the deal will “provide a wide range of benefits for stakeholders, including the Australian racing industry,” and advises that since the merger was announced it has actively engaged with stakeholders, including as part of what it calls “the ACCC informal clearance process.”

The engagement has apparently revealed that “many stakeholders are strongly supportive of the transaction and its anticipated benefits, leading Tabcorp to form the view that it has a compelling case to pursue a merger authorisation application in the Tribunal.”

In Monday’s statement, Tabcorp claims that under the authorisation test, the Tribunal balances public benefits of the proposed merger against likely detriments, including competitive detriments.

This differs, Tabcorp suggests, from the test the ACCC applies, which is limited to assessing whether a proposed acquisition is likely to substantially lessen competition, and is not able to take into account “countervailing public benefits.”

Consequently, the Tribunal merger authorisation will likely deliver greater transaction certainty compared to the ACCC informal clearance process by requiring the consideration of public benefits. Importantly, the Tribunal merger authorisation application is considered within a statutory timetable, Tabcorp notes, perhaps implying that a long drawn out process through the ACCC can be avoided.

Tabcorp says that its application to the Australian Competition Tribunal will be supported by evidence from a wide range of industry participants and experts regarding the substantial public benefits from the merger which will accrue to the racing industry, venue partners, customers, shareholders and the broader community.

And, Tabcorp advises, it has now withdrawn its application for ‘informal’ clearance by the ACCC.

The company notes that it has engaged closely with the ACCC in its market inquiries, and has carefully considered the Statement of Issues (‘SOI’) released by the ACCC last week.

In relation to the one area identified by the ACCC, which on a preliminary view is an issue of competition concern, Tabcorp has committed to divest its Odyssey Gaming Services business and is well advanced with a sale process (see previous report).

Tabcorp asserts that it is confident that as part of the Tribunal process it will address all relevant issues raised by the ACCC.

Tabcorp m.d. and CEO David Attenborough says in the statement:

“Through our extensive discussions with stakeholders since announcement of the transaction, it has become increasingly clear that there is broad-based support among our stakeholders for the proposed combination with Tatts. After careful consideration of the [ACCC] Statement of Issues, Tabcorp believes the merger authorisation process will deliver greater transaction certainty. It enables public benefits, including our strong funding relationship with the racing industry, to be taken into account.”

Tabcorp lists the benefits likely to arise from the merger with Tatts:

* It will deliver value for both sets of shareholders, as well as significant benefits to other stakeholders across Australia including the racing industry, business partners, customers and Governments. Tabcorp and Tatts are the largest source of funding for Australia’s racing industry, having delivered approximately $1 billion to the racing industry in FY 2016, as well as contributing more than $200 million of wagering taxes to State Governments in FY 2016;

* It will create a national footprint with an enhanced operational platform which will create a stronger financial base to support its stakeholders, delivering additional funding to the racing industry and venue partners, which will flow to participants and related industries across Australia.

* This additional funding will create broader economic benefits, including in regional areas; and a pathway to national pooling for parimutuel wagering, subject to regulatory and racing industry approvals and an enhanced ability to adopt strategies to address the national decline in parimutuel betting.

Related and similar