Sweet timing for Tatts and UNiTABBy Helen WestermanMarch 29,...

Sweet timing for Tatts and UNiTAB
By Helen Westerman
March 29, 2006

A COMBINED UNiTAB and Tattersall's would be well placed to go up against rival Tabcorp for its exclusive and lucrative wagering licence, say gaming analysts.

But analysts yesterday played down the likelihood of Tabcorp making a counter-bid for UNiTAB.

Tattersall's and UNiTAB on Monday announced a $4 billion "merger of equals" after months of market speculation, saying the companies were a good fit.

Shares in the thinly traded UNiTAB soared $1.78 after the announcement, but yesterday fell back 51¢ to close at $15.20.

Tattersall's, which on Monday gained 22¢, fell 4¢ to $3.25.

The merger will give the new group operations across most Australian states and give Tattersall's a stake in wagering through UNiTAB's agencies in Queensland, the Northern Territory and South Australia.

The deal will also provide UNiTAB with international exposure through Tattersall's gaming machines and lottery interests in South Africa and its 10.4 per cent holding in British gaming group Talarius.

More broadly, it sets the stage for consolidation in the gaming industry and comes as the Victorian Government reviews all wagering and gaming licences.

Bloomberg reported Macquarie Equities analyst Steve Wheen as saying Tabcorp could be forced into a counter-bid for fear of losing its wagering licence, which expires in 2012.

But in a client note, analysts at Intersuisse said it discounted the possibility because of UNiTAB's high price-earnings multiple compared with that of Tabcorp.

Tabcorp would probably also be required by the Australian Competition and Consumer Commission to re-divest gaming monitoring activities it had sold to UNiTAB when it bought NSW TAB, Intersuisse suggested.

Goldman Sachs JBWere, which is acting for Tattersall's in the merger, said in its note that a counter-bid would have to exceed the implied value of the Tattersall's offer of $14.25 rather than being higher than UNiTAB's current share price.

Citigroup has cut its UNiTAB shares rating from "buy" to "sell". Macquarie and Credit Suisse, however, have both upgraded their recommendation on the stock.

Tattersall's and UNiTAB chief executives had talks yesterday with some of UNiTAB's main institutional shareholders and will meet others today.

Argo Investments managing director Rob Patterson, who owns UNiTAB shares, said it was still too early to categorise the deal and declined to say whether he would be supporting it.

"I think the two companies are well matched to merge. It then gets down to the issue of price or terms," he said.