Is Victorian Premier John Brumby wreaking revenge on Tabcorp for the severe damage he suffered at the time it was floated back in August 1994?
The Kennett Government slammed through the Tabcorp float with indecent haste after being poorly advised by Mike Tilley, the current CEO of Challenger Financial Group which has caused more losses than any other stock for Opes Prime customers.
Opposition leader Brumby was famously blamed by Jeff Kennett, Tilley and The AFR’s then Chanticleer columnist Ivor Ries for single-handedly destroying the float by raising the prospect of introducing competitors to Tabcorp’s gambling licences.
The government was hoping to float Tabcorp for $2.70 a share but was instead forced to settle for the $2.25, the bottom of the range.
Fast forward 14 years and John Brumby has managed to wipe $2.86 a share or $1.5 billion from the value of Tabcorp in one morning.
In percentage terms Tabcorp’s 20% hit – a $7.54 billion company is now only worth $6 billion – was overshadowed by Tattersall’s which this morning opened 25% lower, slashing its market cap by $1.2 billion from $4.63 billion to $3.45 billion.
Woolworths and colourful billionaire Bruce Mathieson are clearly the biggest winners because they already control more than 35% of Victoria’s poker machines. Woolies shares rose 31c yesterday and a further 52c to $30.76 this morning – a total rise of 83c which added 2.8% or exactly $1 billion to its market cap whilst the broader market slipped 1.7%.
Whilst the move to a system similar to the rest of the country is not that surprising, the refusal to pay out $1.2 billion in compensation to the duopolists is the biggest shock from yesterday’s announcement.
Never before has a government decision wiped out $2.7 billion of sharemarket value and Brumby is already being slammed by the likes of Business Spectator’s Stephen Bartholomeusz for immoral behaviour.
Brumby is clearly banking on the lack of sympathy for the duopoly. After all, even after today’s plunge, Tabcorp investors have still enjoyed returns of more than 700% including a big dividend flow. Tattersalls never paid for its pokies licence in the first place – a Kirner Government special which was arguably the most incompetent commercial act by a state government in the last 30 years – making it Australia’s second biggest millionaires’ factory after Macquarie Group.
I reckon this is just a negotiating ploy and the duopolists will eventually settle for something like a discounted wagering licence fee.
That said, the union-controlled Labor Party has always carried some fears for business and this brazen rejection of compensation raises the spectre of sovereign risk. If Labor can do this to Victoria’s gaming duopoly, why should other major licensed businesses such as media companies, banks and telcos not expect the same?
For instance, given Laura Tingle has today revealed that Treasurer Wayne Swan used Glenn Milne to do a hatchet job on RBA governor Glenn Stevens, the banks themselves have plenty to fear.
The latest Mayne Report video covers Slaters, Futuris, Opes and Tabcorp.