Tabcorp and Tatts have announced a merger whereby Tabcorp will purchases all the ordinary shares in Tatts Group. In exchange for their shares, Tatts current shareholders will receive Tabcorp shares and end up with around 42% of the expanded company.
Both Tabcorp and Tatts have ASX-listed notes. Both were issued with “change of control” clauses, which if triggered, allow the holder to redeem the notes prior to the first call date or redemption date. However, given Tabcorp is acquiring Tatts, only the Tatts clause comes into play.
In any case, Bell Potter research analyst Damian Williamson said the transaction, if it were to be approved by various regulatory bodies, would have little effect on Tatts Bonds (ASX code: TTSHA) and Tabcorp Notes (ASX code: TAHHB) holders. “This proposed transaction does not change our opinion that TAHHB will be redeemed at the March 2017 call date, and refinanced out of undrawn debt facilities.” He also notes there is little incentive for TTAHA holders to redeem before the July 2019 call date. “Given TTSHA is trading at a premium to face value, it currently appears unlikely that TTSHA holders will request redemption under a Change of Control Event.”
The transaction is subject to shareholder votes, as well as approval by various regulatory bodies, including approval by the ACCC but Morgan Stanley analyst Nick Markiewicz says the risk of the ACCC knocking back the transaction on competition grounds appears to be “manageable”. Tatts Bonds and Tabcorp Notes were last trading around $103.50 and $101.30 respectively.