More news coming through about the proposed Virgin deal with Tabcorp, and that Tabcorp are a likely take-over target with PBL. This all makes sense as Melco/PBL have a gaming license in Macau and so their partnership with Sir Richard Branson’s Virgin Group would be a perfect fit.

Add to this the fact that PBL is very cashed up, this deal could just well go through!

Speculation emerged yesterday that Tabcorp is set to become the next target of a corporate takeover, with James Packer’s Publishing and Broadcasting Ltd seen as the most likely predator.

Investment bank Citigroup told clients yesterday speculation “abounds that Tabcorp is next to go” in a deal potentially worth up to $10 billion.(US$7.8 billion?

A Citigroup analyst named PBL as a strong contender to buy Tabcorp, at up to $19, excluding any value from the forthcoming Victorian gaming licence renewal. Private equity firms are also possible predators.

Speculation about Tabcorp came as the South China Morning Post reported that Tabcorp was in talks with Richard Branson’s Virgin Group to help operate a pound stg. 3 billion ($7.6 billion) Macau casino.Sir Richard told the Financial Times he was close to securing rights to a large site on which he intended to build a hotel and casino.

It is understood that talks between Tabcorp and Virgin have been under way for several months.

It is also understood that if the Macau deal goes ahead, there is potential for the two companies to extend their partnership to other parts of Asia and Australia, as well as Las Vegas.

Citigroup has a “sum of parts” valuation on Tabcorp of $17.07, with a $19 upside.

Sources suggest that $20 or more would be the starting point for takeover talks.

Citigroup highlighted the strong synergies for PBL from the casino and wagering businesses but said it would need to sell the Victorian gaming licence.

Tabcorp shares closed 26c weaker at $17.39.

Full article | The Australian

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