Tabcorp shareholders will receive 1 Lottery Corp share for every Tabcorp share held
Under the 1-to-1 logic, Lottery Corp shares should be priced at however much Tabcorp declined
Tabcorp was trading around $1.00 (down -81% or -$4.34) when Lottery Corp listed
The fair value of Lottery Corp should theoretically be $4.34
There are a few factors that have bolstered the valuations of both stocks, which will be explained below.
Our previous coverage of the Tabcorp and Lottery Corp demerger, which takes a more fundamental perspective can be viewed here.
Last May, Tabcorp received an unsolicited takeover offer from Apollo Management for its Wagering & Media business and Gaming Services business for a combined value of $4.0bn.
Shortly after, Tabcorp also received an indicative takeover from BetMakers (ASX: BET), valued at $4bn ($1bn cash and $3bn script).
Post demerger, Tabcorp’s market cap has fallen from c.$11bn to around $2.2bn.
While Apollo’s takeover bid was 12 months ago, the company’s present value does seem rather undemanding in comparison.
Tabcorp said that to assist in providing a tax efficient distribution, “it is anticipated that New Tabcorp will pay a FY22 final dividend with reference to the 5 months of TLC earnings prior to the Demerger in addition to the 2H22 earnings of New Tabcorp”.
Having an extra 5 months worth of Lottery Corp earnings within Tabcorp's final dividend will be an extra kicker for shareholders.
The Lottery Corp is poised to be the more growth oriented stock, focused on product innovation and deepening engagement across all channels and digital expansion.
Growth strategies include:
Increase digital penetration
Diversify retail channel mix
Explore opportunities to enhance existing licences
Evaluation potential future new licence opportunities (both domestically and internationally)
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