One of the worst kept secrets in the wagering industry is now in the open with Australia’s largest operator Tabcorp (ASX: TAH) confirming they have knocked back unsolicited offers for their wagering business but will review options to maximise its potential sale price. 

Confirmation that offers from unnamed parties have been knocked back comes with the Board of Directors to commence a strategic review of structural and ownership options. 

Initial offers for the Wagering and Media business were tabled at approximately $3 billion, however these have now been formally knocked back on the basis the Board views it did not adequately reflect the true value of the Wagering and Media division. 

“The assessment of Tabcorp’s strategic and ownership options includes, but is not limited to, a demerger or sale of one or more of our businesses,” said Tabcorp Chairman, Steven Gregg. 

“Our clear objective is to ensure that we fully maximise the value of Tabcorp’s gambling entertainment businesses for our shareholders.” 

Any potential demerger of the wagering business would enable Tabcorp to focus primarily on its lotteries business which has been its most profitable division since international sportsbetting operators emerged in Australia. Without the overheads associated with the brick-and-mortar retail outlets operated by Tabcorp, the likes of Sportsbet, Ladbrokes, Pointsbet, Bet365 and others have become the betting agencies of choice, being able to offer punters with better odds and products due to lower operating costs. 

This was highlighted in Tabcorp’s FY20 results where the Company reported an 11.5% decline in EBITDA to $995 million, of which the Wagering and Media division delivered a 19.5% decline but was propped up by Lotteries and Keno delivering a 5.7% increase. 

These results have continued a trend witnessed over the past five years where Tabcorp’s wagering products have lacked innovation, enabling the rise of international operators in Australia. 

With its losses increasing but valuable assets in the form of wagering licensing and the operator of State-based totalitisers, rumours about Tabcorp demerging the division began swirling last year when wagering Kingpin Matt Tripp was planning a bid. 

Having been the mastermind behind Sportsbet and then BetEasy before selling both businesses to international wagering conglomerates, Tripp’s interest in Tabcorp was somewhat expected. 

Tripp has since invested $25 million into wagering tech company Betmakers (ASX: BET) which is not an actual sportsbook but rather a tech provider that enables independent bookmakers to launch their books online, and continues to consult on their international expansion plans. 

In June last year, BanyanTree Portfolio Manager Zach Riaz suggested that Tabcorp’s share price was significantly undervalued the strength of their lotteries division hence a demerger of the wagering business was a logical step in the interest of growing both divisions.