News: TAH Tabcorp and Tatts reach agreement to combine the two companies

Oct 19 (Reuters) - Tabcorp Holdings Ltd (TAH)

• tabcorp and tatts to combine
• pro forma enterprise value of approximately $11.3 billion , revenue of over $5 billion
• Combined group expected to undertake a $500 million share buyback
• transaction expected to be eps accretive (before significant items) and value accretive for both tabcorp and tatts shareholders
• combined group expected to target a dividend payout ratio of 90% of net profit after tax, before significant items
• completion expected mid-2017 following tatts shareholder
• transaction is unanimously recommended by boards of tabcorp and tatts
• combination expected to deliver at least $130 million of annual ebitda synergies and business improvements
• Deal is expected to result in at least $50 million per annum of additional funding to australian racing industry
• transaction implies a value of $4.34 per tatts share
• combined group expected to target a dividend payout ratio of 90% of npat
• deal in which tatts shareholders will receive 0.80 tabcorp shares plus 42.5 cents cash for each tatts share held
• directors of tabcorp and tatts believe transaction represents compelling opportunity to create significant value for tabcorp and tatts shareholders
• tatts intends to pay its shareholders a fully-franked special dividend of 20 cents per share immediately prior to implementation
• David Attenborough will be managing director and chief executive officer of combined group and damien johnston will be chief financial officer
• Board will be comprised of existing tabcorp board of directors with Paula Dwyer as chairman
• Tatts chairman Harry Boon will join board of combined group as a non-executive director
• Transaction costs are estimated at approximately $90 million.
• Both tabcorp and tatts expect to continue to pay dividends in ordinary course until implementation of transaction
• on completion, existing tabcorp shareholders will own approximately 42% of combined group, tatts shareholders will own approximately 58%
• Under implementation deed tatts is able to pay a special dividend of up to 25 cents per share
• Tabcorp - tatts intends to pay shareholders fully-franked special dividend of 20 cents per share immediately prior to implementation of transaction
• australiansuper, one of tatts' largest shareholders, has indicated that it intends to vote its tatts shares in favour of transaction