The $4.7 billion deal between Tabcorp Holdings Ltd and the Tatts Group Ltd can finally go ahead after the Australian Competition and Consumer Commission (ACCC) dropped its opposition. The watchdog initially filed an objection to a proposed merger in 2017, claiming a deal between two of Australia’s largest betting companies would reduce market competition.
In an official statement, ACCC’s legal counsel Andrew McClelland QC said that a deal would eliminate competition between two companies and destabilise the market. That opinion sat in contrast to the one taken back in 2003. On that occasion, the ACCC rejected any suggestion that a merger between the two companies would have a detrimental effect on consumers.
Indeed, when the issue was raised at the time, it formally stated that it wouldn’t oppose any possibly deals. Then ACCC Chairman, Graeme Samuel, said:
"The ACCC did not believe that the proposed mergers would substantially lessen competition in the relevant markets,” said then ACCC Chairman, Graeme Samuel."
Fast forward 14 years and the ACCC decided to change its stance. As well as fears over competition, the government agency said that the deal didn’t represent any significant benefits for the country. The case ultimately went before an Australian Competition Tribunal in June 2017, where the deal was given permission to go ahead.
Crownbet subsequently requested a Federal Court judicial review. That review came to a conclusion in November, with the Tribunal upholding its original decision. With a second review complete, that was enough for the ACCC to call time on its objections. A statement from the ACCC read:
"The ACCC takes the view that the proposed merger of these two large and close competitors will lessen competition, but because they chose to apply to the Tribunal, the ACCC never reached a conclusion as to whether or not the lessening would amount to a substantial lessening of competition."
Although the watchdog was unwilling to concede that its previous assessments had been wrong, it did state that it could find no legal grounds on which to challenge the latest ruling. ACCC Chairman Rod Sims explained:
"The ACCC has closely examined the Tribunal’s reasons. Unlike the original decision of the Tribunal we do not consider there is any error of law that needs to be corrected. For this reason, the ACCC will not be seeking further review."
With no further objections, Tabcorp Holdings Ltd and the Tatts Group Ltd can begin the official business of merging their assets. When the proposal was first tabled, the projected revenue for the new entity was $5 billion, with earnings before interest, tax, depreciation and amortization at AU$1 billion.
Based on that, the company will have a combined value of more than $11 billion and will become that largest player in the Australian betting market. The recent decision by the ACCC couldn’t have come at a better time for the two betting brands. As they look towards finalising the deal in 2018, the Australian betting market is on a high.
According to a recent government report, annual revenue across the industry topped $24 billion between 2015 and 2016. Pokies continued to dominate, pulling in $12 billion, but sports betting also improved. With 6.8 million Aussies now gambling at least once a month, sports betting turnover increased by 13.1% to $960 million.