Tabcorp will control Victoria betting for another 20 years
Published on: December 18, 2023 at 03:17 pm.
Last updated on: 18 December 2023 at 03:17 h.
Tabcorp has acquired a new exclusivity Victorian Betting and Betting License From the state of Victoria in Australia. This transformative agreement represents a pivotal moment for Tabcorp as it overtakes Sportsbet to dominate retail betting in the state for the next 20 years.
The win gives Tabcorp an exclusive license until 2043. This extended period provides a stable and predictable operating environment, which Tabcorp explained will allow it to invest in long-term growth and innovation.
The licence, which covers retail betting at all of the state’s TABs, bars and clubs, represents the culmination of a competitive bidding process and will conclude Tabcorp’s existing joint venture with the Victorian Racing Industry (VRI). This change eliminates the existing financing agreements between the two companies, allowing Tabcorp to manage its finances and investments more independently.
Victory for Victoria
In exchange for the exclusive licence, Tabcorp will have to make significant financial contributions to the Victorian Government. The first is an advance payment of A$600 million (US$402.96 million) next June 2024. Starting in August 2025, it will have to pay A$30 million (US$20.14 million) annually for the next 19 years.
In total, Tabcorp will pay A$864 million (US$580 million) in license fees over the life of the agreement. However, the company is confident that its profits will significantly exceed costs.
The transaction is expected to significantly expand Victorian TAB and the Group’s margins, contributing to improved earnings quality, according to Tabcorp. FY23 forecasts indicate a significant pro-forma increase in EBITDA (earnings before interest, taxes, depreciation and amortization) and EBIT, strengthening the overall profitability of Tabcorp’s operations.
Tabcorp, which recently won an A$83 million (US$53.2 million) tax break from Australia, has controlled the Victorian betting market since 1994. Its current deal expires next August, setting off a bidding war as it competed primarily with Sportsbet. Owned by Flutter. Sportsbet reportedly made an offer that would have paid more for the licence; However, Tabcorp still wins.
The news gave Tabcorp stock a big boost. On December 13, it was trading at A$0.68 (US$0.46) on the Australian Securities Exchange. After the news broke today, the stock jumped to A$0.90 (US$0.60) and continues to rise.
Guaranteed funding for the Victoria Race
Tabcorp’s existing partnership with Racing Victoria, one of the three VRI entities, saw a 5.1% decline in contributions in 2023. This was due to the growing preference for digital betting over traditional retail channels.
Now, Tabcorp is set to divest its shares in the joint venture in Racing Victoria through the new licence. Instead, the company will inject an additional A$15 million (US$10.07 million) in funding for each of the first three years of the new licence. Tabcorp will then retain all profits from Victoria’s retail betting market.
The revised agreement also stipulates that Tabcorp will commit to paying A$2 million (US$1.34 million) to the government. This contribution is intended to support research on the harms of gambling and contribute to programs that address problem gambling within the state.
Furthermore, Tabcorp has committed an additional A$2.5 million (US$1.68 million) to support existing animal welfare initiatives in the racing industry.
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