price range increased to between 2.9-3.2 July 5 (Bloomberg) -- Tattersall's Ltd., Australia's biggest lottery operator, may raise about A$305 million ($229 million) after increasing the price range for its share sale because of demand from institutions, people involved in the offer said.
Professional investors will be offered shares at between A$2.90 and A$3.20 and bidding for the stock will close today, the people said, declining to be identified. The stock was originally offered at between A$2.40 and A$2.90 each. At the top of the new range, Melbourne-based Tattersall's will have a market value of A$2.2 billion, making it Australia's second-largest gaming company by market value behind Tabcorp Holdings Ltd.
The lure of investing in Australia's A$15.3 billion a year gaming industry may cause investors to push the shares even higher when trading starts July 7, said investors including John Grace. Tattersall's will rank among Australia's 100 biggest companies by market value, meaning investors who track the benchmark index need to buy stock.
``Both Tattersall's and Tabcorp have strong defensive assets that can resist a slowdown with very reliable cash flow,'' said Grace, who holds gaming stocks for the equivalent of $1.5 billion he helps manage at Ausbil Dexia Ltd. in Sydney. ``Tabcorp have got the edge because they have been acquisitive and we may see Tattersall's go a similar way now that they are raising money.''
The IPO will end 120 years of private ownership at Tattersall's. The owners, mostly descendents of people named in founder George Adams' will, are offering 100 million shares, or about 14 percent, of the company. Retail investors will pay A$2.90 a share.
Monopoly
At A$3.20 a share, Tattersall's stock will be priced at 17.6 times forecast 2006 net income of A$127.5 million. Tabcorp shares trade at 17.8 times forecast fiscal 2006 earnings of A$462.2 million, according to the average of eight analysts surveyed by Thomson Financial.
Goldman Sachs JBWere Pty and Macquarie Bank Ltd., Australia's largest-listed investment bank, are managing the share sale.
Lisa Jamieson, a spokeswoman at Macquarie Bank, declined to comment. Hayley Morris, a spokeswoman for Goldman Sachs in Sydney, also declined to comment. Peter Franich, a spokesman for Tattersall's said he couldn't immediately comment.
Becoming a publicly listed company may help Tattersall's keep its monopoly license to run lotteries in Victoria, Australia's second-most populous state, by removing the veil of secrecy that has shrouded the company and opening its ownership structure and finances to public scrutiny.
``The new structure makes it easier for governments and regulators to understand us, because it was always a difficulty in understanding the trustee structure,'' Chief Financial Officer Ray Gunston said when the IPO was announced June 2.
License
Tattersall's license expires in 2007, and the Victorian state government has said Tabcorp and other rivals may bid for the right to run the lottery.
Tabcorp and Tattersall's licenses to operate Victoria's 27,500 slot machines expires in 2012. Tattersall's has more than 260 gaming venues in Victoria, which generate 90 percent of earnings. Its lottery business runs Powerball and Tattslotto games and has licenses in Tasmania, the Northern Territory and the Australian Capital Territory.
The company is listing as earnings fall because of smoking bans in Victorian gaming venues and increased government charges. In April, the government doubled a levy on slot machines to A$3,033 to raise money for state-run hospitals.
Smoking bans were imposed to discourage gamblers after studies found smokers lose more money on slot machines than non- smokers and are more likely to suffer financial hardship.
Tattersall's earnings before interest, tax, depreciation and amortization fell 1.7 percent to A$243.3 million in 2004 from the previous year after the smoking bans took effect. Revenue from gaming machines, which account for two-thirds of total sales, fell 3.8 percent.
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