Tabcorp shares have risen on news that the company has reached an agreement with the government of New South Wales to retain exclusivity for its Star City casino licence. Despite speculation that a second licence for another operator was being considered, negotiations between the two parties have ended with NSW remaining a one casino state.

The new 12-year deal, replacing the one that expires at the end of this year, comes into force on 14 November 2007. Tabcorp will pay a fee of A$100 million (US$91.8 million) in two parts over the next 18 months for ensuring Star City remains free of competition, and by 2012/13 is expected to pay an additional 32% gaming revenue tax. According to NSW Treasurer Michael Costa the new deal is ‘a win for taxpayers, for the local tourism industry and for gamblers’.

Tabcorp today outlined the in-principle agreement with the NSW Government. Chief Executive Officer Elmer Funke Kupper said the agreement will allow the company to proceed with plans to invest approximately $300 million in Star City to make it one of the State’s premier tourist destinations and a top entertainment venue in Australia. He added that the agreement would provide benefits for the NSW Government, the community and Star City.

The agreement also provides for a number of product changes that should make Star City a more attractive Casino destination. Subject to approval from the Casino Control Authority, more table games will be added and, in a move that perhaps should be adopted by other jurisdictions, are reclassifying multi-terminal gaming machines as tables. Betting limits will be lifted on the multi-terminal machines as well as high roller gaming machines, and Star City slot machines will be allowed higher jackpots.

Kupper commented, “No company likes to pay higher taxes and this agreement means Star City will clearly be the highest taxed casino in Australia. However, the Government’s package gives Star City the opportunity to be competitive in both the international and domestic markets. The extension of Star City’s exclusivity rights until 2019 gives us the certainty that we need to invest in a major redevelopment of the casino and hotel complex.” (E-10.30.07)

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