Tabcorp to pay $860 million for 20-year extension of exclusive Victorian wagering license
Shares of Tabcorp experienced a significant boost on Monday following the announcement of a two-decade extension of its exclusive Victorian license for retail wagering and pub betting.
The largest wagering group in the country agreed to a substantial deal, committing to a payment of $600 million upfront and an additional $30 million annually for the next 19 years, totalling $1.2 billion. These annual payments are fixed and not tied to inflation, giving the current value of the total payment an estimated $864 million.
Given Victoria’s prominence in the racing world – with events like the iconic Melbourne Cup – international rivals, including Sportsbet, have sought entry into the market. However, Tabcorp’s move ensures its continued exclusivity in the region, keeping competitors at bay.
The market responded positively to the news, with Tabcorp shares soaring 23 percent to reach 90¢ in early-afternoon trade, marking their highest level in months. Analysts, including Jefferies’ Simon Thackray, expressed optimism, considering the outcome better than anticipated.
Thackray noted, “[It] should alleviate investor uncertainty on the Victorian licence outcome … as well as discussion on shared licence outcomes which could have been operationally messy.”
The agreement also signifies a shift in the structure, eliminating joint venture arrangements with the Victorian racing industry. In return, Tabcorp will experience reduced fees and taxes, while the point of consumption tax for all bookmakers will increase from 10 percent to 15 percent.
Tabcorp CEO Adam Rytenskild highlighted the company’s ongoing restructuring efforts, initiated with the demerger of The Lottery Corporation last year.
“Before we demerged, we didn’t have any level playing fields, and now we have four,” Rytenskild stated, referencing Victoria, Queensland, Tasmania and the ACT.
“Victoria is the best licence in the country, and it is the prototype for the rest of the country.”
The Victorian license extension follows a similar move in Queensland last year, which analysts estimated would save Tabcorp $30 million annually. The company stated that if the terms of the new Victorian license had been in effect earlier, its earnings in the last financial year would have been $140 million higher.
Tabcorp’s aim to compete with digital challengers like Sportsbet and Entain involves reducing fees for exclusive licensing and implementing higher taxes across the sector. Rytenskild asserted that Tabcorp has stabilised its market share and digital presence, expressing a commitment to growth in the face of evolving market dynamics.
“We are competing better than we ever have,” he said.
“It has stabilised somewhat, and Spring Carnival was actually quite good.
“The main focus is how we are competing in whatever the market is and ultimately looking to take share and grow the market. Cycles come and go, and the announcement [of the new Victorian licence] is much bigger than just six months of a soft market.”
Despite recent warnings of soft trading conditions, Tabcorp sees the new Victorian license as a pivotal announcement with implications extending beyond short-term market fluctuations.
