TABCORP'S DEMERGER OF THE LOTTERY CORPORATION

Chairman’s letter

30 March 2022

Dear Tabcorp Shareholder,

On behalf of the Tabcorp Board, I am pleased to present you this Demerger Booklet and to invite you to support the demerger of Tabcorp’s Lotteries and Keno business, The Lottery Corporation (TLC).

Your Board strongly encourages you to support the Demerger, which will create two ASX-listed companies that operate independently with focused Executive Leadership Teams (ELTs).

  • The Lottery Corporation – Australia’s leading lottery and Keno operator and one of the highest performing lottery operators globally1, underpinned by its national distribution network of 3,863 lottery outlets and 3,409 Keno venues (as at 31 December 2021), portfolio of exclusive and/or long-dated licences and approvals, high-profile, recognised brands, and innovative products.
  • New Tabcorp – a leading multi-branded, wagering, media and gaming services operator. New Tabcorp provides wagering across 4,257 retail venues, racing and sports vision across 4,790 media venues and gaming services across 3,955 venues (as at 31 December 2021) as well as transformed omni-channel wagering and media platforms.

The Board’s decision to pursue a demerger of The Lottery Corporation follows the strategic review it conducted over March 2021 to July 2021. As part of the strategic review, the Board considered a number of potential alternatives including the sale of Tabcorp’s Wagering and Media and Gaming Services businesses, following receipt of several unsolicited, non-binding and indicative acquisition proposals for the Wagering and Media business, with one proposal also including the Gaming Services business. After assessing the proposals carefully in the context of the strategic review, the Board determined that it preferred the Demerger on the basis that it represents the most certain and timely path, with lower regulatory impediments, to maximise value for Tabcorp Shareholders.

Through the Tabcorp-Tatts Group merger in 2017 and the subsequent integration, Tabcorp merged six complementary businesses into its current three businesses: Lotteries and Keno, Wagering and Media and Gaming Services. The transaction has created synergies and enhanced the diversification of each of the three businesses, with Tabcorp now looking to demerge one of these businesses, the Lotteries and Keno business.

The Board anticipates that The Lottery Corporation will be well positioned to continue to generate attractive returns for shareholders, driven by its strong cash flow generation, demonstrated ability to drive growth through product innovation and active game portfolio management as well as gain future potential upside from further enhancing the customer experience and increasing digital penetration.

The Board anticipates that New Tabcorp will also be well positioned to deliver a compelling customer experience via its omni-channel model, simplify and streamline MAX, as well as future potential upside from any future Industry Change in the Australian wagering and gaming industry.

The Board is committed to maximising the opportunity for both The Lottery Corporation and New Tabcorp to succeed as independent companies. If the Demerger proceeds, both The Lottery Corporation and New Tabcorp will be allocated appropriate balance sheets and net debt levels to support their respective business requirements and profiles. The Lottery Corporation and New Tabcorp also have experienced and knowledgeable Boards and ELTs, as detailed in Sections ‎3.7 and ‎4.7.

After considering alternatives for Tabcorp and the advantages, disadvantages and risks of the Demerger, the Board unanimously considers that the Demerger is in the best interests of Tabcorp Shareholders. Grant Samuel, the Independent Expert appointed by Tabcorp, has also concluded that the Demerger is in the best interests of Tabcorp Shareholders. A copy of the Independent Expert’s Report is contained in Annexure A – Independent Expert’s Report of this Demerger Booklet.

If the Demerger is approved and implemented, and you are an Eligible Tabcorp Shareholder (who has not elected to become a Selling Shareholder), you will retain your current existing shares in Tabcorp and receive one The Lottery Corporation Share for each Tabcorp Share you hold on the Record Date. The Record Date is expected to be Wednesday, 25 May 2022. Post implementation of the Demerger, you will be able to retain your shares in The Lottery Corporation and Tabcorp, sell either or sell both.

This Demerger Booklet sets out important information about the Demerger that will assist you to make an informed decision about the Demerger, including advantages, disadvantages and risks of the Demerger (see Section ‎2), the risks of an investment in The Lottery Corporation Shares (see Section ‎3.14) and the risks of a continued investment in New Tabcorp Shares (see Section ‎4.12). I encourage you to read this Demerger Booklet carefully in its entirety as part of your consideration of the Demerger Resolutions.

If you have any questions about the Demerger Booklet or the Demerger, please consult your financial, legal, taxation or other professional adviser. You may also call the Shareholder Information Line on 1800 550 560 (within Australia) or +61 1800 550 560 (international) on weekdays between 8:00am and 7:30pm (Sydney time) or visit the Tabcorp website at www.tabcorp.com.au/investors/demergerOpens in new window.

The Demerger must be approved by Tabcorp Shareholders at a General Meeting and a Scheme Meeting to be held consecutively on Thursday, 12 May 2022, with the General Meeting commencing at 10:00am (Sydney time) at the Amora Hotel Jamison Sydney, Whiteley Ballroom, 11 Jamison Street, Sydney NSW 2000. Shareholders may participate in the Meetings either by attending in person or online at https://meetings.linkgroup.com/TAHGeneral22Opens in new window for the General Meeting and https://meetings.linkgroup.com/TAHScheme22Opens in new window for the Scheme Meeting.

Shareholders may vote in person, by proxy, by attorney, or in the case of a corporation, by corporate representative. If you are voting by proxy or by corporate representative, your completed proxy or corporate representative forms must be received by 7:00pm (Sydney time) on Tuesday, 10 May 2022.

The Tabcorp Directors unanimously recommend that you vote in favour of the resolutions to approve the Demerger2. Each Tabcorp Director intends to vote any Tabcorp Shares held by or on behalf of that Tabcorp Director in favour of the resolutions to approve the Demerger.

Thank you for your continued support.

Yours sincerely

Steven Gregg
Chairman


1. The Lottery Corporation has the third-highest draw lottery game sales per capita worldwide. Source: La Fleur’s Almanac 2021 (Lotto and spiel).

2. Mr David Attenborough, the Tabcorp MD & CEO, will cease employment with Tabcorp following the Demerger and will receive certain entitlements as a result (see Section 7.1.5). The Tabcorp Board considers that, despite these arrangements, it is appropriate for Mr Attenborough to make a recommendation in relation to the Demerger Resolutions given his knowledge of Tabcorp and the industry, and that Tabcorp Shareholders would wish to know Mr Attenborough’s views in relation to the Demerger. Mr Attenborough also considers that it is appropriate for him to make a recommendation in relation to the Demerger Resolutions.