Tabcorp (ASX:TAH) proposes to demerge Lottery Corporation; shares gain

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Tabcorp (ASX:TAH) proposes to demerge Lottery Corporation; shares gain

Tabcorp (TAH) share price
Image source: © Vchalup | Megapixl.com

Highlights

  • Tabcorp's lottery and keno business are likely to demerge and form a separate ASX-listed company - The Lottery Corporation.
  • The demerger is subjected to shareholders and regulatory approval.
  • The Lottery Corporation is expected to begin normal trading on the ASX on 2 June 2022.

The shares of the gambling service provider Tabcorp Holdings Limited (ASX:TAH) traded 1.823% higher on the ASX today (31 March) at AU$5.305 per share at 11:48 AM AEDT. Approximately 1.3 million shares of Tabcorp were traded so far today on the ASX.  

The share price of Tabcorp has gained by approximately 14% on the ASX today over the past 12 months. On the other hand, Tabcorp's year-to-date share price gained almost by 2% on the ASX today (TAH) at 11:48 AM AEDT. 

Why are Tabcorp shares trading in green today?

Tabcorp announced a proposed demerger of The Lottery Corporation on the ASX today. According to the proposal, Tabcorp's lotteries and Keno business will likely be demerged into a separate ASX-listed company.  

The proposal also stated that the eligible shareholders who would not elect to become a selling shareholder would retain their current existing shares in Tabcorp and receive one TLC share for each Tabcorp share held at the record date on 25 May 2022.  

Additionally, the company also received a draft class ruling for demerger tax relief. The final class ruling will only be received after the demerger implementation date, which will remain consistent with standard ATO practice.  

Tabcorp will be hosting a shareholders' voting opportunity on the demerger at the shareholder meetings on 12 May 2022. As a result, the board of Tabcorp unanimously suggested its shareholders vote in favour of the demerger and approve the proposal. Furthermore, the independent expert also concluded the demerger to be in the best interests of Tabcorp shareholders.  

Apart from the approval from shareholders, the demerger is also subjected to necessary regulatory approval and court approvals. The Lottery Corporation is expected to commence trading on the ASX on 24 May 2022 on a deferred settlement basis. Trading on a normal basis is scheduled to begin on 2 June 2022. 

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The rationale for the demerger of The Lottery Corporation:

 Tabcorp (TAH) share price

Image source: © Rummess | Megapixl.com

Tabcorp laid down the following rationale for the demerger of The Lottery Corporation:  

  • The demerger of Tabcorp's lottery and keno business is expected to create two significant companies with focused executive leadership teams.  
  • The demerger will allow each business to adopt a more focused operating profile and capital structure which will be aligned to its individual core operations.  
  • It will also preserve shareholders' ability to benefit from participating in any future merger and acquisition activity.   
  • The demerger will also offer shareholders the opportunity to retain full upside potential from various growth opportunities which may arise for both in future.
  • Allows shareholders to value each business separately with potential for market re-rating.  

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About Tabcorp:

Tabcorp Holdings Limited is a gambling and entertainment service providing company established in 1993. The company has spread its footprints widely across three segments- Wagering and media, Lottery and Keno and Gaming services.

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