Tabcorp Holdings Limited (ASX: TAH), the wagering company, announced for the acquisition of Intecq (ASX: ITQ), a gaming systems company providing business development and performance tracking and analysis solutions to gaming operators in Australia, New Zealand and Asia, for $128 million. The strategic step may help Tabcorp in the following manner:
Boost Tabcorp’s Gaming Services business: Under the agreement, Intecq shareholders would get $7.15 cash for each Intecq share held, indicating that the forecasted enterprise value of the group is $1151 million. The offer comprises 31% premium to ASX closing share price of $5.44 on July 29, 2016 (last trading day before the announcement). With this acquisition, Tabcorp Holdings would strengthen its Gaming Services business with Intecq 1,200 licensed venues and solid network of greater than 70,000 electronic gaming machines across Australia.
Indicative Timetable (Source: Company Reports)
Help Tabcorp leverage huge market opportunity: Tabcorp is positioning itself in the huge potential electronic gaming sector which is worth of over $10.8 billion a year in Australia. Intecq offers member loyalty software, cashless gaming tools for pubs, clubs and casinos and tracking systems through its eBet business. Tabcorp’s gaming services business segment has been delivering decent performance, with revenues rising over 11% to $26.9 million during the third quarter of 2016. Tabcorp is funding the acquisition via its current cash and bank facilities.
Contribute to EBITDA: Intecq acquisition would enhance Tabcorp’s operational performance while extending their product and service offering and client base. Tabcorp forecasts that the acquisition would generate an EBITDA of over $20 million in the year post the integration of the business while EPS is estimated to be accretive from the first year.
That is, TGS estimates ITQ to contribute 13% to FY 2016 EBITDA. TAH’s move on agreeing to pay for as high a premium may thus be linked to reviving the revenue growth. Otherwise, Tabcorp is expected to witness a loss in revenues at the back of NSW government’s recent decision of shutting down the greyhound industry in the state by mid-2017. Meanwhile, post the acquisition news, Intecq stock generated over 29% returns on August 01, 2016. Tabcorp Holdings surged over 5.62% in the last one month (as of August 02, 2016).
Tabcorp has been advised by UBS and Allens while Intecq was advised by Credit Suisse and law firm Macpherson Kelley.
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