Tabcorp to demerge Lotteries & Keno to create two standalone companies

Image source: Nils Versemann /

Australia’s largest gambling organisation, Tabcorp Holdings, has unveiled plans for a demerger of its Lotteries & Keno business following a strategic review of all relevant structural and ownership options to maximise shareholder value. 

The demerger, said the firm, will create two standalone ASX-listed companies – Lotteries & KenoCo and Wagering & GamingCo – each with distinct operating profiles, strategies and growth opportunities. 

Lotteries & KenoCo has been earmarked by Tabcorp to become Australia’s leading lottery operator with licences to operate in all Australian states and territories except Western Australia. As a licensee of Keno products it will supply venues across NSW, Victoria, Queensland, South Australia and the ACT (including a digital licence). Chair designate is Steven Gregg, while Sue van der Merwe is CEO designate. 

Wagering & GamingCo will be the firm’s omni-channel wagering operator comprising Sky, a multi-venue, multi-channel racing and sports broadcaster; international businesses in the US and Europe; and MAX, Australia’s largest gaming services provider. Chair designate is Bruce Akhurst, while CEO designate is Adam Rytenskild. 

Updating investors, Tabcorp stated that following the demerger both businesses will benefit from focused management and optimised capital structures alongside increased scale and diversification already achieved through the combination with Tatts Group. 

The demerger will also deliver a more focused operating profile, better aligned to its core operations, the ability to participate in future M&A activity, and access to new investors with different investment preferences and ESG criteria. Shareholders will also have the ability to value each business on a standalone basis, with a potential market re-rating of each business.

Tabcorp Chairman Steven Gregg and the current Board of Directors of Tabcorp will oversee the implementation of the demerger, and David Attenborough will remain as Managing Director and CEO until the process is completed. The firm is targeting completion of the demerger by the end of June 2022, subject to all relevant approvals. 

Gregg said: “Following a thorough and rigorous assessment of all relevant structural and ownership options, the Tabcorp Board of Directors has concluded that a demerger of the Lotteries & Keno business is the optimal and most certain path to maximise value for Tabcorp shareholders. 

“The foundations have been laid for Lotteries & KenoCo and Wagering & GamingCo to deliver long term growth. The Tabcorp and Tatts integration has set up both businesses to benefit from enhanced scale and diversification. 

“The two businesses are expected to be leaders in their respective markets, creating great experiences for millions of customers. They will both build on their heritage of sharing the benefits of their commercial success with governments, the racing industry, licensed venues, newsagents and other retail and business partners. 

“Lotteries & KenoCo offers infrastructure-like qualities, with low capital intensity and upside from continuing digital growth. It is underpinned by its scale, portfolio of exclusive and/or long-dated state licences and attractive financial profile. It has a track record of strong and resilient cash flow generation, driven by its well-balanced portfolio of games, growing digital sales penetration and extensive retail footprint. 

“Wagering & GamingCo will have national scale and reach, organic growth options, and potential upside from any future domestic structural reform and further international expansion. Wagering & Media has undergone a significant transformation and now has an omni-channel offering geared to create the best customer experience across all channels. 

“Following the operational review of Gaming Services, which is being implemented, the business will continue as the largest gaming services provider in Australia with a simplified business model and streamlined operating cost base.” 

On preliminary estimates, the demerger process is expected to incur between $225m and $275m in one-off separation costs and circa $40m and $45m per annum of ongoing incremental costs, pre-mitigation.