Following the bidding war for Aztar Corp in the United States, share prices in Unitab Ltd show that many are anticipating a similar scenario in Australia. Unitab, the second largest wagering company in the country, has rejected an unsolicited bid from bigger rival Tabcorp Ltd for A$1.9 billion (US$1.4 billion) saying it favoured a lower offer from lottery operator Tattersall’s Ltd for A$1.7 billion (US$1.28 billion) cash and stock. The Tattersall’s bid would give Unitab shareholders a larger stake in the new company.

Today Tabcorp called upon the government in the state of Victoria not to reinvent the structure of the gambling industry. The government of Australia’s most populous state is currently reviewing the structure of gaming and wagering licences that expire in 2012. Tabcorp presently holds the wagering licence and Tattersall’s wants the Unitab wagering business in order to bid. Tabcorp contends that a single wagering licence is the best model and that issuing multiple licences would lead to significant loss of economies of scale.

Tabcorp also recommended that the state’s poker machines outside Melbourne’s Crown Casino should continue to be run under the duopoly model of itself and Tattersall’s. The Victorian government has received over 100 submissions from the gaming industry, community groups, local councils and individuals. The Salvation Army is pressing for gaming machines to be confined to Crown Casino. Gaming Minister John Pandazopoulos has stated that the review is to consider the future structure of the state’s gambling industry and is not about the number of gaming machines.

Tabcorp already has about 70% of the Australian wagering market with monopolies in New South Wales and Victoria. Unitab has the rest of the market through betting shops in South Australia, Queensland and the Northern Territory. Tattersall’s has held a monopoly on Victoria’s lottery for half a century but the exclusivity contract is due to expire 30 June 2007. There could be up to three licences granted that are expected to run for 10 years. Nearly 100% of Tattersall’s sales are from the lottery and its share of slot machine revenue.

Australians spend more money gambling than any other nation, probably as much as A$17.9 billion (US$13.4 billion) this year. With so much at stake, Tabcorp will doubtless increase its offer for Unitab. However, Tattersall’s is seen as having fewer regulatory obstacles to overcome and Australia’s antitrust regulator has said that its deal with Unitab would not be blocked. The game is still in play. (E-06.05.06)

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