Playing large Tabcorp confirms break-up provides from a number of events

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Shares in the $9.1 billion firm rose 11.7 per cent to a near 12-month high of $4.58 on the news, and were last up 8.2 per cent to $4.43.

“It validates our view that there is interest in the business and that market prices previously have not reflected anywhere near its true value,” said Gabriel Radzyminski who heads Tabcorp investor Sandon Capital.

Investors such as Perpetual, John Wylie’s Tanarra Capital and Investors Mutual were agitating for change last year which led to the departure of chairwoman Paula Dwyer in December. Tabcorp’s chief executive David Attenborough is due to follow her out the door this year.

Sandon Capital has gone further by advocating for a split of the business to deliver value to investors. “When we wrote to the company in November, we believed it was now the time to rethink the whole strategy, plus there was the change of chair,” he said.

“That effectively means it’s a new board because the dynamics change. It was an opportunity for a new board to start with a blank sheet of paper and say, right, here’s what we’ve got. But what should we be?”

Mr Radzyminski said Sandon’s proposal is a redux of its 2016 campaign at Tatts where Sandon argued the gaming group should split its wagering and lotteries business rather than merge with Tabcorp. Sandon acquired shares in Tabcorp last year and began agitating for change again.

“We’ve now had enough time to show that it just wasn’t going to work,” he said.

“The market was not reflecting the true value of the two businesses. Wagering still has problems that couldn’t be fixed or, that weren’t being fixed, and it might be better if it were a pure-play wagering business.”

Tabcorp’s traditional wagering business, which was already struggling against online competition, had a tough year in 2020 with COVID.

Tabcorp was forced to raise $600 million last August to weather the pandemic storm and slash the value of its wagering business by $1 billion in its full-year accounts after it was hammered by the forced closure of pubs, clubs and betting shops, and the suspension of sporting leagues.

It pushed the group to an $870 million annual loss for the 2020 financial year, compared with a $361 million profit in 2019.

Colin Kruger is a business reporter. He joined the Sydney Morning Herald in 1999 as its technology editor. Other roles have included the Herald’s deputy business editor and online business editor.

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