Tatts Group Ltd Jumped 5.7% on ACCC Statement

Tatts Group Ltd [ASX:TTS] operates various lottery, wagering and sports betting services. This morning, the billion-dollar company’s share price climbed 5.7%, to a high of $4.27.

What happened?

Tatts’ jump was a response to a recent Australian Competition and Consumer Commission (ACCC) statement. The ACCC released a Statement of Issue on the proposed merger of Tabcorp Holdings Ltd [ASX:TAH] and Tatts.

The ACCC ensures individual companies don’t become too influential in any one industry by gaining a monopoly.

ACCC chairman Rod Sims said:

The ACCC’s preliminary view is that the proposed merger is likely to substantially lessen competition in the supply of monitoring and other services to pokies venues in Queensland.

Given these concerns, Tabcorp has suggested possible divestment; it could sell their Queensland electronic gaming machine-monitoring business.

Investors will know the ACCC’s final decision on 4 May 2017.

What now?

Until the merger gets the go-ahead, Tatts will assist Tabcorp in gaining approval from the ACCC. Tatts’ board believes the merger is in the best interests of shareholders.

Under the original agreement, Tatts’ shareholders will receive 0.80 Tabcorp shares, plus 42.5 cents for each share they hold.

That means Tabcorp is effectively paying Tatts shareholders $4. And while its 27 cents lower than what Tatts’ shares are currently trading for, investors must believe 0.80 of a Tabcorp share will appreciate over time.


Härje Ronngard,

Junior Analyst, Money Morning

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