Why Tabcorp should demerge its lotteries business
In our 2016 campaign, Sandon Capital made the case for Tatts Group Ltd (Tatts) to demerge the lotteries and wagering businesses. At the time, we argued the lotteries business was being undervalued by the market and was a globally unique business with infrastructure-like characteristics. Unfortunately, Tatts was acquired by Tabcorp Limited (Tabcorp), with great expectations of a wagering turnaround.
Fast forward to now, Tabcorp has failed to deliver many of the promises of the merger and is in the midst of a changing of the guard. Sandon Capital believes the time has come for Tabcorp to accept that lotteries and wagering are fundamentally different businesses facing different challenges and opportunities that are incompatible. A demerger would ensure existing Tabcorp shareholders have the choice to retain exposure to the lotteries business. We believe the impending departure of the CEO is an appropriate juncture for the Board to take this decision before any new appointment. We've attached the presentation we sent Tabcorp in November 2020.
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Gabriel is the founder and Managing Director of Sandon Capital Pty Ltd, a boutique investment management and advisory firm. He is the portfolio manager of the Sandon Capital Activist Fund and Sandon Capital Investments Limited. Sandon Capital also...