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.

Regards,

Härje Ronngard,

Junior Analyst, Money Morning

PS: It’s not always easy to find growth among billion-dollar stocks. Unless they can significantly increase earnings, you’d be lucky to get double-digit returns. That’s why some investors prefer the smaller end of the market.

Small-cap stocks are a riskier investment. There is no running away from it. But they can potentially grow earnings 10-fold in a short space of time.

Small-cap specialist Sam Volkering has been on the other end of small-caps running up 1,000% or more.

So far in 2017, Sam hasn’t recommended a losing stock yet. In his advisory service, Australian Small-Cap Investigator, his top three active investments are up 304.57%, 466.04% and 1,624.49%.

To find out more, click here.

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