The Tabcorp Holdings Limited (ASX: TAH) share price is catching the eye of investors on Tuesday.
In afternoon trade, the gaming giant's shares are down 81% to $1.03.
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What's going on with the Tabcorp share price?
The collapse in the Tabcorp share price has been driven by the demerger of the company's Lotteries and Keno businesses this morning.
These businesses have been spun off and listed separately as The Lottery Corporation Limited (ASX: TLC).
The good news is that while the Tabcorp share price has crashed today, value has actually been created for shareholders.
Prior to the demerger, Tabcorp had a market capitalisation of approximately $11.9 billion. This is based on 2,225,771,703 shares on issue and a share price of $5.34.
Today, eligible shareholders have been given one share in The Lottery Corporation for every Tabcorp share they owned. This means there are now 2,225,771,703 shares on issue for both Tabcorp and The Lottery Corporation.
So, with the Tabcorp share price currently trading at $1.03, it has a market capitalisation of ~$2.3 billion. Whereas The Lottery Corporation share price is fetching $4.63, giving it a market capitalisation of ~$10.3 billion.
This gives us a combined market capitalisation of $12.6 billion, which is $700 million or 5.9% greater than what Tabcorp was valued at pre-demerger.
Why did the Tabcorp demerger happen?
Management decided to push ahead with the Tabcorp demerger on the belief that it would maximise value for shareholders (so far so good!).
It notes that it will create two significant businesses with focused leadership teams and allow each business to adopt a more focused operating profile and capital structure that is more aligned to its core operations.
In addition, management highlighted that the demerger allows shareholders to retain full upside potential from various growth opportunities which may arise for both businesses. It also creates access to new and different investor categories with different investment preferences and ESG criteria.
How have the businesses been carved up?
The Lottery Corporation is the new home of Tabcorp's Lotteries and Keno businesses. It is an omni-channel business with a portfolio of high profile, recognised brands and games, strong digital growth and a retail footprint across ~7,000 retail outlets/venues.
In FY 2021, these businesses generated 55% or $611 million of Tabcorp's EBITDA.
New Tabcorp has been left with its wager and media and gaming services businesses, which generated revenue of $2,493 million and EBITDA of $464 million in FY 2021.
Management notes that it will be a leader in omni-channel wagering, racing and sports broadcasting, and gaming services solutions. It believes the business is well positioned for organic growth and potential upside from possible changes in the wagering and gaming industry.
