The Betmakers Technology Group Ltd (ASX: BET) share price is dropping after the business revealed a HUGE play for an acquisition.
Betmakers’ gamble on a big acquisition
Before getting into this story, let me remind you that Betmakers has a market capitalisation of $1.29 billion.
Betmakers has submitted an indicative proposal to acquire Tabcorp Holdings Limited‘s (ASX: TAH) wagering and media business for an enterprise value of $4 billion.
How is Betmakers going to fund this? It would be funded through $1 billion in cash (to be financed through debt) and $3 billion in Betmakers shares. The number of shares to be issued is to be fixed at the time the transaction is agreed and priced at a 15% premium to the traded price of Betmakers.
This would mean that Tabcorp shareholders would own approximately 65% of the combined business, plus $1 billion in cash.
Why is the company wanting to do this acquisition?
Betmakers explained that the combination would be transformational and combine the technology capabilities and global platform of Betmakers with the scale and content assets of Tabcorp wagering and media.
Management believe there’s a significant opportunity to enhance this business’ consumer proposition in Australia and improve monetisation of its content globally by leveraging Betmakers’ technology and business to business expertise.
Betmakers believes that value can be unlocked for both sets of shareholders, as well as provide improved funding for the Australian racing industry and new products for customers. It would also result in the retention of an Australian ownership structure.
Tabcorp response
In an early response, Tabcorp pointed out the deal is subject to numerous conditions. The Tabcorp board has not yet formed a view on the merits of the proposal and will assess it in the context of the previously announced strategic review.
Summary thoughts on the deal and Betmakers share price
This is a very large proposition. The Betmakers share price has fallen in early response. I’m not sure if Tabcorp will go for it.
It would be very transformational for Betmakers if it went ahead, but I don’t know if either set of shareholders would want the deal structured like this. It’ll be interesting to see how this develops.
There are other ASX growth shares that have simpler growth plans right now.
