Tabcorp To Control Victoria Betting for Another 20 Years
Posted on: December 18, 2023, 03:17h.
Last updated on: December 18, 2023, 03:17h.
Tabcorp has secured a new exclusive Victorian Wagering and Betting License from the state of Victoria in Australia. This transformative agreement marks a pivotal moment for Tabcorp as it beats Sportsbet for control of the state’s retail betting for the next 20 years.
The victory grants 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 license, which covers retail betting in all of the state’s TABs, bars and clubs, signifies the culmination of a competitive bidding process and will conclude Tabcorp’s current joint venture with the Victorian Racing Industry (VRI). This change eliminates existing funding agreements between the two, allowing Tabcorp to manage its finances and investments more independently.
A Win for Victoria
In exchange for the exclusive license, Tabcorp will have to make substantial financial contributions to the Victorian Government. The first is an upfront payment of AUD600 million (US$402.96 million) next June 2024. Starting in August 2025, it will have to pay AUD30 million (US$20.14 million) a year for the next 19 years.
In total, Tabcorp will have paid AUD864 million (US$580 million) in licensing fees over the life of the agreement. However, the company is confident that its earnings will significantly outpace the costs.
The deal is projected to significantly expand Victorian TAB and Group margins, contributing to improved earnings quality, according to Tabcorp. Projections for FY23 indicate a significant pro-forma uplift in Group EBITDA (earnings before interest, taxes, depreciation and amortization) and EBIT, enhancing the overall profitability of Tabcorp’s operations.
Tabcorp, which recently won an AUD83 million (US$53.2 million) tax break from Australia, has controlled the Victorian wagering market since 1994. Its current agreement expires next August, leading to a bidding war as it competed primarily with Flutter-owned Sportsbet. Sportsbet had reportedly submitted a bid that would have had it pay more for the license; however, Tabcorp still won.
The news gave a huge boost to Tabcorp’s stock. On December 13, it was trading at AUD0.68 (US$0.46) on the Australian Securities Exchange. After the news broke today, the stock jumped to AUD0.90 (US$0.60) and continues to climb.
Guaranteed Funding for Racing Victoria
Tabcorp’s existing partnership with Racing Victoria, one of the three VRI entities, experienced a 5.1% decline in contributions in 2023. This was due to a growing preference for digital betting over traditional retail channels.
Now, Tabcorp is set to eliminate its joint venture contributions to Racing Victoria through the new license. Instead, the company will inject an additional AUD15 million (US$10.07 million) in funding for each of the first three years of the new license. Following that, Tabcorp will retain all profits from the Victorian retail betting market.
The revised agreement also outlines a commitment from Tabcorp to make an AUD2-million (US$1.34 million) payment to the government. This contribution is intended to support research on gambling harm and contribute to programs addressing problem gambling within the state.
Moreover, Tabcorp is earmarking an additional AUD2.5 million (US$1.68 million) to bolster existing animal welfare initiatives within the racing industry.
Source: casino.org
