Wagering newcomer raises the stakes in bumper $1 billion WA TAB sale

While potential valuations varied, initial hopes that the sale would raise $1 billion were dashed by a condition that any new buyer would have an ongoing obligation to provide funding to the racing industry.

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Internally, the government settled on a figure of about $300 million as being more realistic, but it was not that simple.

With the racing industry sentiment somewhere between sceptical and openly hostile, it demanded a “no worse off” position.

The demand was backed in by racing minister Colin Holt, a member of the Liberals’ alliance government partners the Nationals, who said he wouldn’t support it unless proceeds went back into racing.

All of a sudden the sale looked like it would do nothing to put a dent in debt and Nahan conceded it was perhaps not worth the political trouble and so put it on the backburner in favour of other (stalled) efforts like Fremantle Port (since abandoned).

A change of government in March 2017 saw the TAB sale rebooted, but only barely.

Under Labor treasurer Ben Wyatt, the sale process was slowly cranked up again.

By June 2018 there as a Treasury discussion paper which included potential sale models, including an ongoing funding obligation for the new owner.

“No worse off” was said to be a key tenet of the process.

In September 2019, sale legislation passed parliament, with the most contentious aspect seemingly the ability of the TAB to introduce electronic simulated racing products like Trackside.

This was opposed by social services groups on the basis it would increase gaming harm in a state that, unlike the rest of the country, has limited poker machines to just Crown casino at Burswood, but would sweeten the pot for any prospective new owner.

The legislation laid out the obligation for the new owner of the TAB to provide ongoing funding for industry, but then-treasurer Ben Wyatt told parliament this would be by contractual negotiation between the new owner and Racing WA, the governing body.

“The product fee will be paid by the operator from its wagering activities and set as a percentage of the operator’s gross operating margin,” Wyatt explained.

By early 2020 negotiations were reported to have progressed with TabCorp, but then the pandemic hit, markets melted, and the parties agreed to put the whole sale process on hold.

It proved to be a fortuitous pause: COVID spurred a gambling boom as punters poured lockdown savings into wagering, with the WA TAB record a record gaming margin of $374 million on $2.3 billion turnover in 2020-21.

The sale process was rebooted in late 2021 but by March 2022, sources close to the process were saying that the ongoing funding obligations would be significantly would back.

Those factors, they said, explained why an asset once thought to command $300 million was now all of a sudden worth up to $1 billion again.

Given the bitterness with which the racing industry greeted the original proposals to sell, its silence the second time around has been remarkable.

The government would no doubt argue that is due to its consultation efforts but the pie didn’t all of a sudden triple.

The sale bill sets aside 35 per cent of proceeds for infrastructure, but this is money that can be spent once, rather than an ongoing source of growth funding to support prize money and other operational requirements of the industry.

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There is a 15 per cent point of consumption tax that applies to all bookmaking operators that has been in place since early 2019, but somewhere along the line the government has decided to take the cash up front, rather than in the future.

For a decade, the conventional wisdom among those in favour of the sale has been that the government-owned WA TAB is an island amid the rising seas of large, multinational corporate competition, becoming less valuable and competitive as ravenous competition nips all around it.

In his second reading speech to Parliament on the sale Bill, Wyatt articulated the underlying rationale: “Intense competition from larger, domestic and internationally backed corporate wagering operators with strong economies of scale; customer preferences shifting from the TAB’s traditional strengths, with trends toward online channels, away from physical premises, fixed-odds betting, away from parimutuel, and more wagering on sports relative to races; and the TAB’s relatively small scale constraining its ability to leverage investment in marketing and technology compared with its competitors.

“In light of these challenges, the case for selling the TAB essentially boils down to the idea that a larger operator will be better placed to manage these challenges over the longer term through the benefits of scale and efficiency and thereby provide a more reliable revenue stream for the racing industry into the future.”

It is passing strange, then, that the apparent preferred bidder is a start-up.

Matthew Tripp is hardly a bookmaking rookie, having founded Sportsbet and BetEasy.

Betr will be owned by News Corp, Las Vegas-based Tekkorp Capital, ASX-listed BetMakers Technology Group and has the backing private equity firms Apollo Global Management, Washington H. Soul Pattinson and Blackstone, according to reporting by this masthead.

In an interview last week Tripp said the plan was to leverage the assets of Betr’s media partners, in other words, to do what SKYbet in the UK has done.

So, look forward to odds brought to you by Betr in News Limited tabloids, and on live sport broadcast on Fox Sports and Kayo.

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Will that include Channel Seven, Racing.com, or The West Australian?

Kerry Stokes’ interest in the TAB was widely known back in the Nahan days and Seven West Media’s possible participation in Betr has been mooted in reports in the Australian Financial Review, News Corp’s The Australian and his own paper in recent months.

It is believed SWM is not a direct investor in Betr right now, and while Tripp has declined to comment directly, he said other partners may come on board in future.

Stokes has been in the mix for other McGowan asset sales too.

He is the preferred the East Perth Power Station redevelopment site on the Swan River, alongside fellow billionaire Andrew Forrest – which WA taxpayers are shelling out tens of millions of dollars to rehabilitate – and recently withdrew from another old power station site in South Fremantle, judging its remediation costs to be uncommercial.

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