Gambler to take IPO punt

Gaming group Tattersall's Holdings said yesterday it aimed to raise as much as A$290 million ($312 million) in an initial public offering (IPO) as it fights to keep crucial gaming and lottery licences.

The company, named after an English sporting club, will sell the shares at A$2.40 to A$2.90 apiece ahead of its July 7 debut. That would value it at A$1.7 billion to A$2.03 billion - the country's largest newly listed company this year.

The monopoly lottery operator is owned by around 2500 descendants and former staff of 12 beneficiaries named in the will of founder George Adams, a saddler, baker and gold prospector who died in 1904. Adams began Tattersall's in 1881, when he was a bar owner and held a public sweep on a horse race.

Tattersall's, whose main rival is Tabcorp Holdings, holds gaming licences and the only private lottery sanctioned in the south-east state of Victoria as well as lottery licences in other states.

The company, which also has interests in Fiji, the Cook Islands, South Africa and Sweden, said the IPO was priced at 13.2 to 15.9 times 2005-06 earnings. Tabcorp trades at around 13.9 times forecast 2006 earnings while wagering group UNiTABtrades at 21.5 times.

"It's a business that has very high regulatory risks so it will have to be at the right price," said Andrew Martin, fund manager at Alliance Capital Management. "The shortness of supply always tends to help a bit but uncertainty about whether the businesses they are running at the moment will still have licences has got to put some uncertainty in people's minds.

Investors worry that Tattersall's could lose a crucial licence to operate nearly 14,000 poker machines in Victoria in 2012. An announcement is due in 2007.

The renewal of the company's monopoly Victoria lottery licence, which expires in 2007, is also uncertain. Up to three 10-year licences could be issued during a 2006 tender.

"We've got no idea whether or not [Tattersall's] will be able to retain the licences. It's a huge issue for them," said Martin.

"Any of the gaming companies in Australia would probably look at the lottery licence," he said.

Tabcorp, which has the other Victoria gaming licence but has no lottery licences, bought gaming groups Tab and Jupiters in an attempt to offset uncertainty. Standard & Poor's lifted its outlook on Tabcorp to stable on Thursday, citing "effective management" of the renewal of the Victorian wagering and gaming licences.

Tattersall's sales have been dented by smoking bans and laws stipulating it must return 60 per cent of turnover as prize money.

"Are lottery operations themselves better investments than lottery tickets? We find that returns are positive but poor compared with domestic gaming peers and international lottery operators," a research note from Smith Barney said, adding a married person was around 12 million times more likely to divorce than win Tattersall's "Powerball" lottery.