Tabcorp Holdings Limited · ASX:TAH
Tabcorp — Merger or Acquisition (June 2006)
52 slides from Tabcorp's merger presentation, Jun 1, 2006
Slide 1: Takeover offer for UNiTAB Limited
Tabcorp Holdings Limited Takeover offer for UNITAB Limited 4 June 2006 x s ‘ . Rete, Tabcorp the biager better gare
Slide 2: Agenda
2. Comparison of Tabcorp's Offer and the Tattersall’s proposal 3. Benefits for Tabcorp shareholders 4. Benefits for Queensland and the Australian racing industry 5. Offer conditions and funding structure Notes to the presentation && Tabcorp -
Slide 3: The implied value of Tabcorp's Offer is $14.25 per UNiTAB share
The implied value of Tabcorp's Offer is $14.25' per UNiITAB share x * x * * x x * x > Tabcorp has announced a takeover offer (“Offer”) for UNiITAB >» The implied value of Tabcorp's Offer is $14.25 per UNITAB share, assuming a Tabcorp VWAP of between $15.00 and $17.00 >» UNITAB shareholders have a ch
Slide 4: The implied value of Tabcorp's Offer is $14.25 per UNiTAB share
The implied value of Tabcorp's Offer is $14.25' per UNiITAB share x * x * * x x * x Implied Implied Tabcorp Tabcorp value of Tabcorp value of vwaP Shares** the Offer the Offer $14.50 x 0.95 $13.78 $14.50 x $14.05 $17.50 = x 0.84 $14.67 $17.50 x $14.43 Noie: Refer to siide 37 for the notes accompanyi
Slide 5: Tabcorp believes its Offer is significantly more attractive to UNiTAB shareholders
» Tabcorp believes its Offer is significantly more attractive to UNiITAB shareholders than the Tattersall’s proposal >» The acquisition of UNITAB is the next step in creating an Australian wagering and Sportsbetting champion > The acquisition of UNITAB is expected to contribute synergies and efficie
Slide 6: 1. Summary of Tabcorp's Offer
1. Summary of Tabcorp's Offer 3. Benefits for Tabcorp shareholders 4. Benefits for Queensland and the Australian racing industry 5. Offer conditions and funding structure Notes to the presentation & Tabcorp
Slide 7: Comparison of Tabcorp's Offer and the Tattersall's proposal
Comparison of Tabcorp’s Offer and the Tattersall’s proposal 4 x x x * x x x K Tabcorp's Offer is superior to the Tattersall's proposal Tabcorp’s Tattersail’s Benefits to UNITAB shareholders _ Offer proposal 1. Implied value Higher >. Lower 2. Multiple of earnings Higher. : Lower 3. Expected increase
Slide 8: Tabcorp's Offer is at a premium to the Tattersall's proposal
1. Tabcorp’s Offer is at a premium to the Tattersall's cs x * x » proposal. Tabcorp's Offer’ Tattersall’s proposal - fixed cash? Tattersall’s proposal - all shares? Tattersall's proposal - maximum cash (subject to scale back}? Source: fRESS and company announcements Note: Refer to slide 38 for the n
Slide 9: Tabcorp's Offer is at a premium to the Tattersall's proposal
1. Tabcorp’s Offer is at a premium to the Tattersall’s + proposal x * 4 ‘ 4 x The Deloltte standalone valuation of Tattersall’s (included in the UNITAB Explanatory Memorandum) is not supported by relevant objective data > Deloitte’s conclusions are based on, among other matters, a standalone valuati
Slide 10: Tabcorp's Offer represents a more attractive multiple of UNiTAB's earnings
2. Tabcorp’s Offer represents a more attractive multiple of » UNITAB’s earnings . * ‘ x ‘ ITDA for Tabcorp's Offer represents a multiple of 12.6x' UNITAB’s forecast the year ending 30 June 2006 EV/EBITDA multipies?* 16.0x 12.6x 12.0% ROX. they a & 9.3x 9.3x a 8.5x 78 im OX = B.0x TAK ty ae 4.0x - 5.
Slide 11: Greater increase in pro-forma EPS
3. Tabcorp’s Offer is expected to provide a greater increase » In pro-forma.EPS x * x * x « Nlustrative pro-forma EPS (pre non-recurring iterms)~FY2006 120.0 e S = 100.0 93.4 96.0 Q : & Zz => 80.0 6 a £ & 8 60.0 a a mt 40.0 UNITAB stand alone = UNITAB share of UNITAB share of UNITAB share of UNITAB
Slide 12: Greater increase in pro-forma DPS
3. Tabcorp’s Offer is expected to provide a greater increase » In pro-forma.D PS. . * x * x « Hlustrative pro-forma DPS-FY2006 100.0 80.9 80.0 DPS (cents per UNITAB share) 60.0 40.0 UNITAB stand alone" UNITAB share of UNITAB share of Tabcorp/UNITAB Tatiersall's/UNITAB (post synergies and {post syner
Slide 13: Tabcorp's Offer provides greater certainty of value
4. Tabcorp's Offer provides greater certainty of value >» Tabcorp's Offer structure provides greater downside protection to UNiITAB shareholders * The implied value of Tabcorp's Offer remains at $14.25 per UNITAB share, while the Tabcorp VWAP is between $15.00 and $17.00 « The implied value of the T
Slide 14: Share price premium/(discount) to broker valuations
4. Tabcorp's Offer provides greater certainty of value Tabcorp’s share price is better supported by current broker valuations Share price prerniurn/(discount) to average of current broker valuations wae $18.00 $3.50 $17.00 $16.72 Z $3.00 $16.00 $2.50 $15.00 $14.00 $2.00 Average of Tabcorp Share pric
Slide 15: Offer superior based on average broker valuations
4. Tabcorp's Offer provides greater certainty of value Based on the average of current broker valuations for Tabcorp and Tattersall’s, Tabcorp's Offer is superior to the Tattersall's proposal $16.00 $14.00 il ni $12.00 Implied value per UNITAB share $10.00 Tattersall's propogal Tabcorp's Offer ase T
Slide 16: Greater diversification of earnings
5. Tabcorp’s Offer provides greater diversification of » earnings. : . . : ‘ Tabcorp's Offer provides UNITAS shareholders with the opportunity to exchange their UNITAE shareholding for shares in Australia’s premier diversified gambling and entertainment company Business portfolio of a merged Tabcorp
Slide 17: Greater diversification of earnings
5. Tabcorp’'s Offer provides greater diversification of » earnings . 4% Wagering 29% Casinos 40% 27% Wagering I, 26% i) Lotteries 6% Net revenue 4,476 EBITDA 1,289 EBIT 1,102 Net revenue 3,159 EBITDA 420 EBIT 322 Source: Tabcorp and the UNITAS Explanatory Memorandum Note: Refer to slide 48 for the n
Slide 18: Lower exposure to licence renewal risk
6. Tabcorp's Offer provides lower exposure to licence - renewal risk. @ Tabcorp earnings subject to licence renewal in the next 6 years li Tabcorp earings subject to licence renewal after more than 6 years (or not subject to licence renewal) l@ UNITAB earnings = 41% approx 58% <1% @ Tattersaill's ea
Slide 19: Pro-forma EPS less sensitive to a licence renewal payment
. Under Tabcorp’s Offer expected pro-forma EPS is less sensitive to a licence renewal payment _. ‘ x > The Victorian Government is currently conducting a review of the structure of the post 2012 licences for Victorian wagering, gaming and Keno >» The Victorian Government is also in the final stages
Slide 20: EPS less sensitive to a licence renewal payment
7. Under Tabcorp’s Offer EPS is less sensitive to a licence +» renewalpayment . : ‘ ‘ . llustrative pro-forma EPS (pre non-recurring items, post synergies and efficiencies) —FY2006 120.0 100.0 EPS (cents per UNITAB share) 80.0 60.0 40.0 UNITAB stand alone = UNITAB share of UNITAB share of UNITAS sha
Slide 21: EPS less sensitive to a licence renewal payment
7. Under Tabcorp’s Offer EPS is less sensitive to a licence » renewalpayment « x : x . > The EPS impact for a UNITAB shareholder is expected to be significantly more sensitive to a licence renewal payment under the Tattersall's proposal than under Tabcorp's Offer for the three reasons set out below:
Slide 22: Opportunity to hold shares in the world's sixth largest gambling group
8. UNiITAB shareholders gain the opportunity to hold » shares in the world’s sixth largest gambling group’ A combined Tabcorp/UNITAB would have greater capacity to pursue international strategic growth opportunities through both greater financial capacity and broader gambling expertise Enterprise va
Slide 23: 3. Benefits for Tabcorp shareholders
1. Summary of Tabcorp's Offer 2. Comparison of Tabcorp's Offer and the Tattersall’s proposal 4. Benefits for Queensland and the Australian racing industry 5. Offer conditions and funding structure Notes to the presentation && Tabcorp -
Slide 24: Strategic benefits
Strategic benefits a x x » The acquisition of UNITAB is the next step in creating an Australian wagering and sportsbetting champion « The merged entity will have distribution channels for wagering and sports betting product with access to more than 70% of Australia’s adult population through retail
Slide 25: Attractiveness of the Queensland market
Attractiveness of the Queensland market a a x x * x Queensland has consistently outperformed the Victorian and NSW thoroughbred industries in terms of pari-rautuel turnover growth in recent years as a result of stronger population growth and a stronger economy Pari-mutuel thoroughbred turnover growt
Slide 26: Expected synergy benefits
Expected synergy benefits > Tabcorp has undertaken limited due diligence on UNITAB’s operations, based on publicly available information and Tabcorp management's understanding of UNITAB’s business v Synergies and efficiencies (net of payments to the racing industry) are expected to contribute approx
Slide 27: Tabcorp has a strong track record in post merger integration
Tabcorp has a strong track record in post merger integration ®» Tabcorp acquired Star City in October 1999 and extracted substantial business improvement gains from the acquisition « — EBITA (on a full cost allocation basis) for Star City grew from $112 milfion for FY2001 to $205 million for FY2005
Slide 28: 4. Benefits for Queensland and the Australian racing industry
1. Summary of Tabcorp's Offer 2. Comparison of Tabcorp's Offer and the Tattersall’s proposal 3. Benefits for Tabcorp shareholders 5. Offer conditions and funding structure Notes to the presentation & Tabcorp
Slide 29: Benefits to Queensland of a merger
A merger of Tabcorp and UNiTAB would offer the following benefits to Queensland vy vy Yy Tabcorp currently has casino, hotel, entertainment and hospitality operations at three casinos in Queensland being: » Conrad Jupiters on the Gold Coast * Conrad Treasury in Brisbane » Jupiters Townsville in Town
Slide 30: Benefits for customers and the Queensland racing industry
Benefits for customers and the Queensland racing industry * x * * A * x * * » The Queensland and South Australian racing industry are currently paid a set product fee by the wagering operator based on turnover >» Anincrease in turnover as a result of the expected introduction of ‘best of breed’ wage
Slide 31: Benefits for the Queensland racing industry
Benefits for the Queensland racing industry x * ¥ * x a a >» Tabcorp already operates on-course facilities at a number of Queensland race clubs « Operates totalizators for the Brisbane Turf Club, Queensiand Turf Club and the Ipswich Turf Club, and has arrangements with the Rocklea Harness Racing Clu
Slide 32: Benefits for the Australian racing industry
Benefits for the Australian racing industry 4 x x x * x > By bringing UNiITAB and Tabcorp together, we can create an Australian wagering champion that has the scale and products to deliver the best racing and wagering experience in Australia » Acombination of UNiITAB and Tabcorp would provide the op
Slide 33: 5. Offer conditions and funding structure
1. Summary of Tabcorp's Offer 2. Comparison of Tabcorp's Offer and the Tattersall’s proposal 3. Benefits for Tabcorp shareholders 4. Benefits for Queensland and the Australian racing industry Notes to the presentation & Tabcorp
Slide 34: Offer conditions
Offer conditions a x x >» Tabcorp’s takeover offer is subject to various conditions, as set out in Tabcorp’s announcement released to the ASX today, including: * 90% minimum acceptance » Part 5 of the TAB Queensland Limited Privatisation Act 1999 (Qid) being repealed or amended by the Queensland par
Slide 35: Funding structure
Funding structure x * * Tabcorp would conservatively fund the acquisition of UNITAB Number of UNITAB shares (m) Implied vaiue per share’ Equity ($m) 800 Acquisition equity value ($m) Net debt ($m) 4,288 UNITAB net debt? ($m) Acquisition enterprise value’ ($m) Total funding ($m) 2,088 » Standard & Po
Slide 36: Notes to the presentation
1. Summary of Tabcorp's Offer 2. Comparison of Tabcorp's Offer and the Tattersall’s proposal 3. Benefits for Tabcorp shareholders 4. Benefits for Queensland and the Australian racing industry 5. Offer conditions and funding structure && Tabcorp -
Slide 37: Notes: slides 3 and 4
& Tabcorp Slide 3—The implied value of Tabcorp's Offer is $14.25 per UNITAB share Assumes a Tabcorp share price of between $15.00 and $17.00 during the VWAP Period, subject fo the effects of rounding The actual fraction at the lower end of this share consideration range is 57/68 Tabcorp shares per U
Slide 38: Notes: slide 8
» Slide &—Tabcorp’s Offer is at a premium to the Tattersall’s proposal 4. Assumes a Tabcorp share price of between $15.00 and $17.00 during the VWAP Period, subject fo the effects of rounding 2. Based on a Tattersail's share price of $2.98, being the closing price for Tattersall's shares on the ASX
Slide 39: Notes: slide 10
» Slide 10—Tabcorp's Offer represents a more attractive multiple of earnings 4. & Tabcorp The enterprise value/EBITDA multiple represented by Tabcorp‘s Offer assumes a Tabcorp share price of between $15.00 and $17.00 during the VWAP Period, UNITAB net debt of $188 million as at 31 December 2005 and
Slide 40: Notes to the presentation
Notes to the presentation » Slide 11—Tabcorp's Offer is expected fo provide a greater increase in pro-forma EPS 1. The iflustrative pro-forma EPS (pre non-recurring items) impact for a UNITAB shareholder under the Tabcorp Offer has been calculated on the assumption that all UNITAB shareholders elect
Slide 41: Notes to the presentation
Notes to the presentation » Slide 11—Tabcorp's Offer is expected fo provide a greater increase in pro-forma EPS (continued) 2. The calculation of the illustrative pro-forma EPS (pre non-recurring items) impact for a UNITAB shareholder under the Tattersall's proposal assumes that alf UNITAB sharehold
Slide 42: Notes to the presentation
Notes to the presentation >» Slide 11—Tabcorp's Offer is expected to provide a greater increase in pro-forma EPS (continued) 3. The average of current broker NPAT estimates for Tattersall's for the year ending 30 June 2006 is calculated from ten broker research reports available to Tabcorp dated ove
Slide 43: Notes to the presentation
Notes to the presentation » Slide 12—Tabcorp’s Offer is expected to provide a greater increase in pro-forma DPS 1. The UNITAB dividends for the year ending 30 June 2006 are assumed to be double the interim dividend already paid 2. The illustrative pro-forma DPS impact for a UNITAB shareholder under
Slide 44: Notes to the presentation
Notes to the presentation » Slide 13—Tabcorp's Offer provides greater certainty of value 1. Tabcorp’s offer provides a guaranteed cash consideration of $8.25 per UNITAB share under the Cash And Share Alternative compared to $3.91 per UNITAB share under the fixed cash alternative of the Tattersal!'s
Slide 45: Notes to the presentation
Notes to the presentation » Slide 13—Tabcorp's Offer provides greater certainty of value (continued) 3. Based on Tattersall’s closing share price on 30 May 2006 and the average of current broker valuations for Tattersall’s, being the most recent valuation provided by nine brokers reporting between 2
Slide 46: Notes to the presentation
Notes to the presentation » Slide 15—Tabcorp's Offer provides greater certainty of value 4. if the value of the Tattersall's share component of the Tattersall's proposal were to be measured on the basis of the average of current broker valuations for Tattersall's (on a stand alone basis) of $2.74 pe
Slide 47: Notes to the presentation
Notes to the presentation » Slide 15—Tabcorp's Offer provides greater certainty of value (continued) 6. To the extent that the Tabcorp VWAP approached a price equivalent to the average of current broker valuations of $16.72 the position would be different. If the Tabcorp VWAP were $16.72, a UNITAB s
Slide 48: Notes to the presentation
Notes to the presentation » Slide 17—Tabcorp’s Offer provides greater diversification of earnings 1. After allocation of corporate costs and excluding synergies and assuming no divestments are made 2. The EBITDA contributions for Tabcorp’s wagering, gaming, casinos and media divisions are based on T
Slide 49: Notes to the presentation
Notes to the presentation » Slide 18—Tabcorp’s Offer provides lower licence renewal risk 4. Tabcorp's current earnings that are subject to licence renewal risk in the next six years are those relating to its Victorian wagering, gaming and Keno operations and New South Wales Keno operations 2. As not
Slide 50: Notes to the presentation
Notes to the presentation » Slide 20—Under Tabcorp's Offer EPS is less sensitive to a licence renewal payment 4. The acquisition and shareholder re-investment assumptions incorporated into this analysis are the same as those detaifed in the notes 2 and 3 to slide 11 of this presentation. In addition
Slide 51: Notes to the presentation
Notes to the presentation » Slide 20—Under Tabcorp's Offer EPS is less sensitive to a licence renewal payment (continued) 2. Tattersall’s Victorian gaming, lotteries and Keno licences renewal payment of $1.0 billion is consistent with 6 broker research reports dated between 23 February 2006 and 5 Ma
Slide 52: Notes: slide 22
» Slide 22—UNITAB shareholders gain the opportunity to hold shares in the world’s Arona & Tabcorp sixth largest gambling group Includes pubficly listed companies that derive their earnings from predominantly offline gambling operations. Enterprise values are based on closing prices and exchange rate