Tabcorp awarded exclusive 20 year Victorian Wagering and Betting Licence

In a significant development, Tabcorp Holdings Limited has been granted the exclusive Victorian Wagering and Betting Licence (New Licence) by the Victorian Government. The new licence, effective for a substantial 20-year term starting August 2024, comes with modernised terms aimed at creating a level playing field for taxes and fees in Victoria.

Key Highlights:

1. Exclusive Licensing: Tabcorp has obtained an exclusive license, which will remain in force until 2043, marking a pivotal moment in its operational landscape.
2. Modernised Terms: The modernised licence terms are designed to ensure fairness in taxes and fees, enhancing Tabcorp’s competitiveness in the Victoria wagering market.
3. Financial Impact: The license is expected to bring about a significant positive impact on Tabcorp’s financials. Projections indicate a substantial increase in Group EBITDA, with an indicative uplift of $140 million on a pro-forma basis if the new licence terms had been applied in FY23.
4. Financial Commitments: To secure this exclusive licence, Tabcorp will make substantial premium payments, including an upfront payment of $600 million in June 2024 and fixed payments of $30 million annually from August 2025 to 2043. The indicative value of the licence is estimated at $864 million.
5. Financial Funding: The upfront payment in June 2024 is planned to be fully funded from Tabcorp’s existing debt facilities.
6. Strategic Assurance: The exclusive licence ensures Tabcorp’s unique customer experience across various platforms—destinations, digital, and vision—in an evolving regulatory landscape.

Details of the New Licence:

1. Changes in Arrangements: The New Licence marks the end of Tabcorp’s current joint venture arrangement with the Victorian Racing Industry (VRI) and terminates existing industry funding obligations.
2. Level Playing Field: These changes result in a level playing field in Victoria, aligning Tabcorp’s wagering taxes and racing and sports product fees with those of other operators.
3. Financial Projections: The New Licence is expected to expand Victorian TAB and Group margins, enhancing the quality of earnings. Projections for FY23 indicate a pro-forma uplift in Group EBITDA and EBIT, contributing to improved Victorian Variable Contribution margin.
4. Financial Commitments to the Government: Tabcorp will pay a significant licence fee of $600 million in June 2024, followed by 19 annual payments of $30 million from August 2025. This financial commitment is estimated to boost Tabcorp’s earnings per share (EPS) and Group Return on Invested Capital (ROIC) on a pro-forma basis.
5. Transition Arrangements: Transition arrangements with the Victorian Racing Industry (VRI) are expected to be finalised shortly, providing near-term funding certainty. These arrangements include fixed distributions and additional funding for the first three years of the New Licence.

Tabcorp’s successful bid for the exclusive Victorian Wagering and Betting Licence marks a transformative moment, promising financial gains and strategic advantages in the competitive wagering landscape.

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