BetMakers (ASX: BET) share price drops following Tabcorp buyout proposal
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the BetMakers Technology Group Ltd The share price (ASX: BET) was down on Friday.
In the morning trade, shares of the betting technology company are down 9% to $ 1.45.
Why is the BetMakers share price falling?
BetMakers share price declines after the company confirmed speculation it would be interested in acquiring the Tabcorp Holdings Limited (ASX: TAH) Betting and media company.
According to the statement, the company submitted an indicative and non-binding proposal to acquire the betting and media business of Tabcorp for an enterprise value of $ 4 billion.
According to the indicative proposal, Tabcorp would receive $ 1 billion in cash, which BetMakers plans to fund through debt financing, and $ 3 billion in BetMakers shares. With regard to the latter, the number of shares to be issued will be fixed at the time a transaction is concluded and at the price of a premium of 15% compared to the price negotiated by BetMakers before the signing.
Based on the 10-day Volume Weighted Average Price (VWAP) through May 26, 2021, the indicative proposal would provide Tabcorp shareholders with an approximate 65% stake (on a fully diluted basis) in the combined operations. BetMakers and Tabcorp Wagering and Media plus A $ 1 billion in cash at Tabcorp.
In addition, BetMakers proposed that the equity consideration be distributed in cash to Tabcorp shareholders on a pro rata basis. This will allow Tabcorp shareholders to convert their indirect interest in Tabcorp Wagering and Media into a direct and liquid interest in the combined entity, providing flexibility and choice.
The combined entity is expected to be moderately oriented at less than 2.5 times net debt / EBITDA on a pro forma basis.
Justification of the acquisition
There are a number of reasons why BetMakers believes the acquisition and proposal to be a compelling value proposition for both groups of shareholders.
The first is that it brings together two very complementary companies to create a competitive global betting and technology platform with scalable operations in the B2B and B2C markets.
Management also notes that the merged entity will be able to leverage BetMakers’ technology and product innovation to compete more aggressively in an increasingly digitally-driven market.
Another is that global opportunities will be sought by leveraging TAB’s historic and iconic Australian brand and content with BetMakers’ established global network, market access and strong partnerships with US racing organizations.
He also expects the monetization of media content from Tabcorp Wagering and Media globally through BetMakers’ global partner network.
BetMakers strategic advisor Matt Tripp said: “I am excited about the potential opportunity to re-energize Tabcorp’s betting and media business. There is significant growth potential for the company in partnership with BetMakers and I hope to have the opportunity to support the Australian racing industry which is built on the success and growth of TAB. “
“I have been very impressed with the world-class team that BetMakers has put together and the enormous growth opportunities they have created globally, including in the rapidly emerging American betting landscape,” and the timing couldn’t be better for this unique opportunity. In addition to the value this offering is expected to deliver for shareholders of both companies, this is an incredibly exciting opportunity for Tabcorp’s betting and media business to maximize its business potential on a global scale.
Tabcorp has acknowledged receipt of the proposal. However, its board of directors has not yet made up its mind on the merits of the proposal. It intends to evaluate it as part of the strategic review announced previously.
Tabcorp’s share price is up 4% on news. Judging by the market reaction, it looks like investors believe Tabcorp shareholders are getting the most out of the deal here.