Tabcorp (TAH) announced it will pursue a demerger of its Casinos business to create two separate listed entities, one focusing on Casinos, and the other on Wagering, Gaming and Keno.
Tabcorp Chairman, Mr John Story said a demerger of the Casinos division recognises the different growth, investment and management characteristics of Tabcorp’s businesses. “Over the past decade, Tabcorp has built three strong operating divisions which are each of a substantial size and market leaders in their own right. The priorities for these businesses have started to diverge, and will increasingly do so in the future. There is now a compelling case to give investors shares in the separate businesses and by doing so, provide greater investment choice and the opportunity to manage their exposure to the different assets.
Tabcorp’s dividend payout ratio for FY2011 is expected to be 60% of normalised net profit after tax, compared to 70% for FY2010. The carrying value of assets and earnings of the two companies may be affected by demerger accounting adjustments that will be confirmed over the coming months. Casinos will operate four of Australia’s premier casino assets: Star City in Sydney, Jupiters on the Gold Coast, Treasury in Brisbane and Jupiters Townsville. Together they produce normalised revenues in excess of $1.4 billion per annum3. Each of the casinos has long term licences and stable regulatory conditions. In Sydney, a $960 million capital investment to expand Star City Casino is currently underway and is progressing well. This investment will create a world class entertainment destination on Sydney harbour. The project is expected to complete mid calendar year 2012. Tabcorp also announced today that it will invest up to $175 million to upgrade its Jupiters Casino on the Gold Coast and create an international entertainment and resort destination. The investment will significantly expand the non -gaming facilities, including eight new restaurants and bars, a new night life venue, a refurbishment of the pool area and creation of a new spa.
Tabcorp (post demerger) will be Australia’s leading Wagering, Gaming and Keno operator. It will be a substantial business with several long dated licences, stable margins and robust cashflows, with excellent earnings visibility offering a high yield. Tabcorp will continue to work with the NSW Government and the NSW racing industry to progress the introduction of new products that improve the customer offer, the competitiveness of the NSW wagering business and the future funding of the NSW racing industry. In Gaming, Tabcorp has a strong business that will go through a significant change in August 2012 when its current Victorian licence to operate electronic gaming machines will expire. Tabcorp has successfully launched a new business, Tabcorp Gaming Solutions, that will continue to provide gaming services in Victoria from 2012. In Keno, Tabcorp is the national leader. The Keno business has expanded successfully in NSW and Queensland and currently has over 2,600 distribution points. In Victoria, the Government is expected to issue a new Keno licence that will operate from 2012.
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