It's not every day that a $1.3 billion company makes a $4 billion acquisition proposal.
But that's exactly the case with BetMakers' (ASX: BET) bid to acquire the wagering and media business of Tabcorp (ASX: TAH).
Under the proposal, which smells more like a merger, Tabcorp would receive $1 billion in cash plus $3 billion in BetMakers shares, valuing the target at more than three times the current value of BET itself.
Strangely, the deal would give Tabcorp a 65 per cent interest in BetMakers, a gambling industry technology group that builds white-labelled platforms for wagering operators, giving TAH shareholders control over the smaller company.
This gamble must be enough for BetMakers board though - by relinquishing control over the company they'd receive Tabcorp's well-established wagering and media business, giving them leverage to push into an international market.
However shareholders don't appear to be convinced by the proposal, with shares crashing by more than 10 per cent in the hour after the ASX announcement was made.
As unusual as the deal is, at its state value it is superior to other bids on the table for Tabcorp's wagering and media business from Apollo and Ladbrokes owner Entain. Both of those are worth $3.5 billion each.
However, it equals Apollo's $4 billion proposal to acquire Tabcorp's wagering & media business and its gambling service business in a bundle.
In attempting to justify his all-in punt, BetMakers CEO Todd Buckingham said the deal would bring together two complementary businesses to create a competitive global wagering and technology platform.
"Over the past few years, BetMakers has been focussed on growing an international footprint to position itself as a world-leading data and technology products and services provider that can deliver commercial benefits for the two critical pillars of the racing world: racing bodies and wagering operators," Buckingham said.
"The potential acquisition of Tabcorp's Wagering and Media business represents and exciting opportunity for BetMakers to deliver transformational growth and realise the value of these new assets in line with this strategy.
"Building on BetMakers' success to date, the combined entity would be a compelling investment proposition as one of the most broadly deployed global racing networks in the market. We are uniquely placed to pursue commercial opportunities globally, and in particular, in the United States."
The proposal is just that at this point in time, and there is no certainty it will result in any transaction.
In the event that a definitive transaction is executed, completion will be subject to ASX and Betmakers' shareholder approvals.
Further, the share consideration aspect of the proposal will be distributed in specie to Tabcorp shareholders on a pro rata basis, meaning TAH shareholders can convert their indirect interest in the wagering & media business into a direct and liquid shareholding in the combined entity. BetMakers expects the merged company will be moderately geared at less than 2.5x net debt/EBITDA on a pro forma basis.
BetMakers' big swing makes it the latest incumbent in the world of gambling to try and acquire a bigger company.
Star Entertainment, which has a market cap of $3.87 billion, has offered 2.68 of its own shares for every Crown share, and a cash alternative of $12.50 per Crown share for up to 25 per cent of the company's issued capital.
In its proposal, Star estimates the merger would result in indicative cost synergies of between $150 million and $200 million per annum.
Help us deliver quality journalism to you.
As a free and independent news site providing daily updates
during a period of unprecedented challenges for businesses everywhere
we call on your support