Tabcorp to control Victoria gambling for another 20 years
Tabcorp has secured a new exclusive Victorian gaming and gambling license from the Australian state of Victoria. The transformative deal marks a pivotal moment for Tabcorp as it beats Sportsbet to control the state's retail betting business for the next 20 years.
The win grants Tabcorp an exclusive license until 2043. This extended period provides a stable and predictable operating environment, which Tabcorp says will enable it to invest in long-term growth and innovation.
The license covers retail gaming operations at all TABs, pubs and clubs in the state and represents the culmination of a tender process that completes Tabcorp’s current joint venture with Victoria Racing Industries (VRI). The change will eliminate the existing financing agreement between the two companies, allowing Tabcorp to manage its finances and investments more independently.
Victoria’s Victory
In return for the exclusive license, Tabcorp must make a significant financial contribution to the Victorian State Government. The first is an upfront payment of A$600 million ($402.96 million) in June 2024. The company must pay A$30 million ($20.14 million) over the next 19 payroll years, starting in August 2025.
Tabcorp will pay a total of A$864 million (US$580 million) in royalties over the term of the agreement. The company is confident its revenue will significantly exceed its costs.
Tabcorp said it expected the transaction to be significantly accretive to TAB Victoria's and the group's profit margins and help improve the quality of earnings. Forecasts for FY23 show significant growth in group EBITDA (earnings before interest, taxes, depreciation and amortization) and EBIT, which will improve the overall profitability of Tabcorp's operations.
Tabcorp, which recently received A$83 million ($53.2 million) in tax breaks from Australia, has controlled Victoria's gambling market since 1994. The current agreement is set to expire next August, setting off a bidding war as the company competes primarily with Flutter-owned sportsbook . Sportsbet has reportedly proposed a higher price for the license. However, Tabcorp still wins.
The news gave Tabcorp's share price a huge boost. As of December 13, it was trading at A$0.68 (US$0.46) on the ASX. The stock jumped to A$0.90 ($0.60) on Monday after the news broke and continued to rise.
VIC FINANCING GUARANTEED
Contribution from Tabcorp's existing partnership with Racing Victoria, one of three VRI companies, fell by 5.1% in 2023. This is due to the growing preference for digital gambling over traditional retail channels.
The new license will now see Tabcorp cancel its joint venture contribution to Racing Victoria. Instead, the company will provide an additional A$15 million ($10.07 million) for each of the first three years of the new license. Thereafter, Tabcorp will retain all profits from the retail gambling market in Victoria.
The revised agreement also includes a commitment by Tabcorp to pay A$2 million ($1.34 million) to the government. This article is intended to support research on the harms of gambling and contribute to plans to address problem gambling in the state.
In addition, Tabcorp will provide an additional A$2.5 million (US$1.68 million) to strengthen existing animal welfare initiatives within the racing industry.
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Source: www.casino.org
