Tabcorp to Control Victoria Betting for Another 20 Years

Posted on: December 18, 2023, 03:17h. 

Last updated on: December 18, 2023, 12:45h.

Erik Gibbs Read More
Expertise: Asia Pacific Gaming, Gaming Business, Global Gaming.

Tabcorp has secured a new exclusive Victorian Wagering and Betting License from the state of Victoria in Australia. This transformative agreement marks a pivotal moment for Tabcorp, as it beat Sportsbet for control of the state’s retail betting for the next 20 years.

Bettors place wagers on races through TAB betting kiosks in Australia
Bettors place wagers on races through TAB betting kiosks in Australia. Tabcorp will continue to control wagering in Victoria for the next 20 years. (Image: Asian Racing Report)

The victory grants Tabcorp an exclusive license until 2043. This extended period provides a stable and predictable operating environment, which Tabcorp explained will allow it to invest in long-term growth and innovation.

The license, which covers retail betting in all of the state’s TABs, bars, and clubs, signifies the culmination of a competitive bidding process. It will conclude Tabcorp’s current joint venture with the Victorian Racing Industry (VRI). This change eliminates existing funding agreements between the two, allowing Tabcorp to manage its finances and investments more independently.

A Win for Victoria

In exchange for the exclusive license, Tabcorp will have to make substantial financial contributions to the Victorian Government. The first is an upfront payment of AU$600 million (US$402.96 million) in June 2024. Starting in August 2025, it will have to pay AU$30 million (US$20.14 million) a year for the next 19 years.

In total, Tabcorp will pay AU$864 million (US$580 million) in licensing fees over the life of the agreement. The company is confident that its earnings will significantly outpace the costs.

The deal is projected to significantly expand Victorian TAB and Group margins, contributing to improved earnings quality, according to Tabcorp. Projections for FY23 indicate a significant pro-forma uplift in Group EBITDA (earnings before interest, taxes, depreciation, and amortization) and EBIT, enhancing the overall profitability of Tabcorp’s operations.

Tabcorp, which recently won an AU$83 million (US$53.2 million) tax break from Australia, has controlled the Victorian wagering market since 1994. Its current agreement expires next August, leading to a bidding war, as it competed primarily with Flutter-owned Sportsbet. Sportsbet had reportedly submitted a bid that would have had it pay more for the license. However, Tabcorp still won.

The news gave a huge boost to Tabcorp’s stock. On December 13, it was trading at AU$0.68 (US$0.46) on the Australian Securities Exchange. After the news broke on Monday, the stock jumped to AU$0.90 (US$0.60), and continued to climb.

Guaranteed Funding for Racing Victoria

Tabcorp’s existing partnership with Racing Victoria, one of the three VRI entities, experienced a 5.1% decline in contributions in 2023. This was due to a growing preference for digital betting over traditional retail channels.

Now, Tabcorp is set to eliminate its joint venture contributions to Racing Victoria through the new license. Instead, the company will inject an additional AU$15 million (US$10.07 million) in funding for each of the first three years of the new license. Following that, Tabcorp will retain all profits from the Victorian retail betting market.

The revised agreement also outlines a commitment from Tabcorp to make an AU$2-million (US$1.34 million) payment to the government. This contribution is intended to support research on gambling harm and contribute to programs addressing problem gambling within the state.

Moreover, Tabcorp is earmarking an additional AU$2.5 million (US$1.68 million) to bolster existing animal welfare initiatives within the racing industry.