Tabcorp Holdings Ltd.'s announcement yesterday that it will purchase Jupiters Ltd. is leaving many in the I-gaming industry to wonder what will happen to Centrebet, the online sports betting business belonging to Jupiters.
The merged Australian gaming companies will create an entity that is expected to have more than AU $700 million in annual earnings before interest, tax, depreciation and amortization.
One facet of the sale is that Jupiters will part ways with Centrebet by either selling it, spinning it off or taking it public. According to a press release from Jupiters, Centrebet has no home with the merged company.
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"As Centrebet does not fit with Tabcorp's international growth priorities and strategic direction, both parties have agreed that value for Jupiters' ordinary shareholders can be maximized by divesting the Centrebet business prior to the merger."
-Jupiters' Board of Directors
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"As Centrebet does not fit with Tabcorp's international growth priorities and strategic direction, both parties have agreed that value for Jupiters' ordinary shareholders can be maximized by divesting the Centrebet business prior to the merger," the company stated. "Accordingly, Jupiters' ordinary shareholders will share in the value realized from the divestment of Centrebet on a pro-rata basis. The merger of Jupiters and Tabcorp is not conditional on the divestment of Centrebet."
Rob Hines, the managing director of Jupiters, is reportedly being spoken of as the possible leader of a management buyout of Centrebet, the Australian newspaper Courier-Mail reported today. Hines said it is too early to tell what his involvement will be with the future of Centrebet. He also declined to name a dollar value for the online company.
"I think Centrebet is a terrific business," he said. "It's been extremely successful and I think there will be number of parties very interested in acquiring it and if there was an opportunity for the existing management of Centrebet to participate in some way, I think that would be to the future benefit of Centrebet."
The merger, which still has to be approved by the Queensland treasurer, indicates a value of AU $6.06 per share of Jupiters stock.
In addition to a portion of the proceeds from the sale of Centrebet, Jupiters' ordinary shareholders will receive 24 shares of Tabcorp and AU $285 for every 100 ordinary shares of Jupiters they own.
Lawrence Willett, the chairman of Jupiters, said the offer from Tabcorp gives shareholders fair consideration for their stake in the company.
"It allows shareholders to realize approximately 60 percent of their holdings in cash, while the share consideration will allow them to participate in an enlarged and more diversified gaming company," Willett said.
Centrebet, based in Alice Springs, is one of oldest online sports books. It was acquired by Jupiters in November of 1998 and is licensed by the Northern Territory Racing Commission. Centrebet expanded its service in September of 2002 to include the United Kingdom.
In addition to Centrebet, Jupiters owns three of the four licensed casinos in Queensland.