Pacific Consortium to launch revised all-cash Tatts Group bid $4.21 (AFR)

BRISBANE, AUSTRALIA - OCTOBER 27: CEO Robbie Cooke at the Tatts Group AGM on October 27, 2016 in Brisbane, Australia. (Photo by Glenn Hunt/Fairfax Media) Glenn Hunt

• by
• Michael Smith
• Anthony Macdonald
• Sarah Thompson

The Pacific Consortium has made an all-cash offer for lotteries and wagering giant Tatts Group, threatening to topple a $11.3 billion merger with Tabcorp.

The consortium, which includes private equity firm KKR, Morgan Stanley's infrastructure arm and First State Super each with a 30 per cent stake, made an offer on Tuesday night which values the target at $4.21 per share.

It's understood the consortium sent a letter to Tatts chairman and notified the company's advisers.  
The consortium, which also includes Macquarie Group with a 10 per cent stake, sweetened its original $8 billion cash-and-shares offer Tatts rejected last year with the revised all-cash offer which does not require regulatory approvals.  

The consortium had been seeking a potential buyer for Tatts' wagering operations but has decided to proceed with an offer for the entire company. Its previous bid was rejected by Tatts prior to Christmas.

The offer could potentially upset an agreed $11 billion tie-up between Tabcorp and Tatts. Tabcorp's November offer valued Tatts at $4.34 a share at the time but is valued at around $4.20 at current share prices. It is still waiting for regulatory clearance.
Tatts Group shareholder Sandon Capital, which has argued the lotteries business has been undervalued in the Tabcorp offer, said the latest bid would put pressure on the Tatts board to open its books to the Pacific Consortium in the absence of a higher offer.
"This looks like it is clearly designed to get the board to give them due diligence. We now have the beginning of a bidding war," Sandon's managing director, Gabriel Radzyminski said.
The revised offer was pitched as more certain than Tabcorp's scrip and cash bid, in light of recent equity market conditions, and is believed to be subject to confirmatory due diligence.

It was also pitched as being at a substantial premium - up to $650 million - to where Tabcorp's offer valued Tatts at the time of the wagering company's half-year result in February when Tatts chief executive Robbie Cooke unveiled numbers hit by soft lotteries and wagering results and Tabcorp itself revealed a hit to its bottom line.
Tatts shares closed at $4.35 on Tuesday.
Macquarie Capital is advising the Pacific Consortium, while Goldman Sachs is tending to Tatts and UBS is advising Tabcorp.
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