Racing NSW supremo V’landys settles Tabcorp dispute as shareholders give green light

Racing NSW boss Peter V’landys has settled an ongoing dispute with Tabcorp over the $11 billion split of its wagering and lotteries division, paving the way for the gambling giant’s demerger to go ahead without any further roadblocks.

V’landys confirmed he had struck a long-term multi-million dollar deal with Tabcorp after threatening to take legal action if the demerger went ahead. He said in March the split would be a “financial disaster” for the racing industry.

Racing NSW has struck a deal with Tabcorp, removing the obstacle to its demerger. Credit:Kate Geraghty

“We have come to an arrangement where we are supporting the demerger because we have a buffer against the exposure of any losses to the NSW Racing industry,” he told this masthead. “We are now not exposed to risk.”

V’landys declined to comment on the amount of money NSW Racing will receive from Tabcorp, but industry sources suggested is expected to be more than $10 million per annum.

Tabcorp shareholders on Thursday voted overwhelmingly in favour of a demerger that will hive off its booming lottery arm into a new ASX-listed company. Just under 99 per cent of votes were cast in favour of the demerger at a shareholder meeting on Thursday morning, paving the way for The Lottery Corporation to be listed on the ASX on May 24.

Tabcorp chairman Steven Gregg said the company was pleased to have received shareholder approval.

“This is an important milestone in repositioning the Group’s portfolio and setting up Tabcorp and The Lottery Corporation for future success,” Gregg said.

Tabcorp decided to demerge last July after it received two $3.5 billion takeover offers from global wagering giant Entain and private equity group Apollo Global Management.

The $11 billion outfit faced repeated calls from shareholders to unpick the 2017 merger of Tabcorp and the Tatts Group, as the company’s struggling wagering division dragged on its outperforming lotteries business, with investors like for its reliable “infrastructure-like” properties.

V’landys’ concern with the demerger was the last major roadblock for the Tabcorp demerger process.

Racing NSW controls a key regulatory licence for Tabcorp in a major market, meaning V’landys effectively had veto power over any deal. In exchange for a funding deal with Racing NSW, Tabcorp has an exclusive licence to have retail outlets in NSW until 2033, and a wider licence until 2097.

Sources familiar with the deal said NSW racing industry currently receives about 25 per cent of Tabcorp’s wagering and lotteries division profits, but also incurs 25 per cent of corporate costs.

V’landys said the poor performance of the wagering division combined with the increase in corporate costs from the separation would spell disaster for the industry. Tabcorp said in its demerger booklet that it anticipated $23 million per annum (pre-tax) of corporate and operating costs, which are associated with services and internal management systems were partially allocated to what will become The Lottery Corporation.

He said in March he would exercise his legal rights if Tabcorp did not guarantee the losses that would be incurred in the demerger. “It’s no secret that the wagering division has been performing poorly, so we are not going to be the ones left holding the failure they created,” he said at the time.

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