Thursday, June 02, 2011

Tabcorp shareholders back casinos spin-off

Tabcorp faces risk of losing Victoria betting license

MELBOURNE, June 1 - Shareholders of Tabcorp, Australia's biggest gaming group, approved plans to spin off the company's casinos on Wednesday, a move that could open the way to takeovers of the independent betting and casino businesses.

The decision was based on proxy votes released at a shareholders' meeting which were close to unanimously in favour of the split.

Tabcorp decided to split the company after a series of blows, from smoking bans and equine influenza to the loss of its gaming machine duopoly in the state of Victoria, slammed its shares over the past four years.

"The cleanest, most effective outcome for shareholders is for the companies to go their separate paths," Chairman John Story told shareholders.

"Time will tell, but we believe the outcome will be successful," he said.

Story is set to become chairman of Echo Entertainment, which will operate the casinos business. Analysts see Echo Entertainment as a potential takeover target for Crown Ltd , Australia's top casinos group, international casinos groups and private equity firms.

"The creation of two companies potentially enables each company to participate in any consolidation or corporate activity in their respective industries," Story said.

The split needed approval from a majority of Tabcorp shareholders voting and at least 75 percent of the votes cast.

The stock was down 0.8 percent at A$7.75 at 0049 GMT, down 56 percent from a record high of A$17.59 four years ago.

Tabcorp is hoping the separated betting and casinos companies will perform better as more focused businesses and be more open to takeovers, matching a move last month by top brewer Foster's Group , which spun off its wine arm.

A merger between Tabcorp and wagering rival Tatts Group has long been touted.

The key risk for Tabcorp ahead of any deal is a decision due this month by the Victorian government on the new wagering license from 2012. Tabcorp is the current owner of the license and is bidding against Tatts for the new 12-year license.

Tabcorp is considered the favourite to win the license, as it already has the infrastructure in place, but the state government could shock the market like it did in 2008 when it stripped Tabcorp and Tatts of their duopoly on gaming machines.

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