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Tatts Group buys New South Wales lottery for A$850m

Mar 3, 2010, 9:15 am

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InternationalInternational: Tatts Group buys New South Wales lottery for A$850m

The state government of New South Wales has sold its lotteries business to Tatts Group for A$850m (US$764m) after an auction process that attracted both Australian and international bidders.  The total proceeds of the sale will exceed A$1bn after A$160m of cash and other assets from NSW Lotteries are transferred to the government.

Melbourne-based Tatts, which operates lottery businesses in three Australian states and two territories, faced competition from a consortium led by Ontario Teachers' Pension Plan.

Intralot, the Greek operator, and Gtech, the US-based lottery unit of Italy's Lottomatica, were also present in the final stages of the auction.

As part of the deal, Tatts Group has secured an exclusive 40-year license to run public lotteries in NSW, Australia's most populous state.

Dick Mcllwain, Tatts chief executive, said that the acquisition was a logical expansion to its lottery businesses.

In 2007, Tatts paid A$542m for Golden Casket, the Queensland lottery business, and Mr Mcllwain said both transactions were agreed on similar transaction multiples.

He added that consolidation of the group's lottery operations would drive synergies as the group moved toward a single operating system.

"Coupling these benefits with the relatively favorable fiscal regime provides Tatts with a reliable and low-risk investment, which will secure the future of its lotteries business around Australia," Mr Mcllwain added.

Tatts said the acquisition of NSW Lotteries is forecast to generate an additional A$120m of earnings before interest, tax, depreciation and amortization by 2014.

However, Tatts shares fell 7 per cent to A$2.30 on concerns the group may have paid too much for the business.

One analyst said NSW Lotteries would need to perform strongly if it was to reach its 2014 ebitda target, adding Tatts may look to develop a national lottery in Australia similar to the one operated in the UK.

The NSW government last year planned to sell its lotteries business with a 30-year license but market sources at that time suggested a price tag of closer to A$600m.

The NSW government was advised by Goldman Sachs JB Were, the Australian affiliate of the US investment bank.

Financial Times

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