A consortium backed by US private equity giant KKR & Co KKR.N offered A$6.15 billion ($4.65 billion) cash for Australian lottery operator Tatts Group Ltd TTS.AX , threatening an agreed merger with Tabcorp Holdings Ltd TAH.AX , two sources familiar with the situation said on Wednesday.
Tatts said its board was assessing how the consortium proposal compared to an offer from betting group Tabcorp that would allow the pair to form an Australian gambling powerhouse.
As first reported by The Australian Financial Review, the consortium on Tuesday night wrote to Tatts with a revised all-cash offer for the entire business, which values Tatts at $4.21 per share, similar to Tabcorp's cash-and-scrip bid now on the table.
The cash-and-scrip offer comprised $3.40 in cash, and one share in Tatts' wagering and gaming businesses - referred to as '"Wagering & Gaming Co" - which Pacific Consortium meant to separate from Tatts' lottery business should the takeover bid succeed.
Tatts shares closed at A$4.35 a share on Tuesday.
Charlie Green, a director at Hunter Green Institutional Broking, which owns Tatts shares, said the board had enough grounds to reject the consortium bid as inferior to the Tabcorp offer.
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"Once this review is complete, an update will be provided to the market", Tatts said. The offer is for the entire Tatts business although the main prize is Tatts' lotteries division. "The great advantage of the Tabcorp bid is that Tatts shareholders get to share in the upside".
The proposal has been offered by the Pacific Consortium, which comprises KKR, First State Superannuation, Morgan Stanley and Macquarie Corporate Holdings.
Respective boards for Tabcorp and Tatts had already unanimously recommended sealing the deal between the two gambling operators.
Pacific Consortium valued one share in Wagering & Gaming Co at $1.00 to $1.60.
"The agreements are conditional upon the Australian Competition and Consumer Commission accepting an undertaking to be provided by Tabcorp or the Australian Competition Tribunal otherwise granting authorisation for the proposed combination and the proposed combination becoming effective", the gaming giant said.
Shares in Tatts are down nearly 3% year to date.