Tatts in A$1.9b bid for Unitab

SYDNEY - Tattersall's, Australia's top lottery operator, launched a A$1.9 billion ($2.2 billion) agreed bid for second-ranked wagering group Unitab to take on rival Tabcorp and tap growth overseas.

Shares in Queensland-based Unitab, which analysts have long seen as a target in any consolidation in Australia's A$15 billion gaming industry, leapt to a record on the takeover plan, which Unitab said would boost earnings for its shareholders by as much as 30 per cent in the first year.

Analysts said the proposed tie-up put Unitab in play, with Tabcorp most likely to make a counter offer, while casino operators, the Packer family-owned PBL and New Zealand's SkyCity, were also potential bidders.

"The game is certainly on," said George Clapham, portfolio manager at ABN Amro Asset Management.

"This might prompt Tabcorp to look at Unitab more closely, PBL does not have a wagering business in Australia and SkyCity may want to force things along as well because they have had discussions with Unitab - so nothing's certain."

Unitab and Melbourne-based Tattersall's, which only listed on the Australian Stock Exchange in July, told a briefing the deal would create a company with revenues of more than A$3 billion - closing in on the A$3.7 billion in sales generated by leading wagering company Tabcorp in fiscal 2005.

A tie-up of Tattersall's, which has a market value of A$2.3 billion, and Unitab at A$2.1 billion - based on latest prices - would generate cost savings of about A$10 million in the first year and about A$20 million in the second year and beyond, the companies said.

"My initial view is that this looks like a deal that is fair for both parties," said Craig Shepherd, gaming analyst at Commonwealth Securities. "From valuation and offer, it's quite good."

Under the plan, Tattersall's will issue 4.33 shares for each Unitab share. Tattersall's will also offer a A$522 million cash alternative to buy Unitab shares at A$14 a share.

Unitab shares jumped to a high of A$16, signalling the market believes a rival offer may emerge.

Asked whether a rival bid was likely, Unitab chief executive Dick McIlwain said: "Well, if there is going to be another bid, it is going to have to be a hell of a bid ... they would have to pay a lot to get us interested."

Tattersall's shares traded as high as A$3.35 before easing to trade 7 per cent up at A$3.29.

The float of 125-year-old Tattersall's last year delivered a windfall to around 2500 descendants and former staff of 12 beneficiaries named in the will of founder George Adams.

Tattersall's chief executive Duncan Fischer will lead the new company, and the chairman will be nominated by Unitab.

- REUTERS