Tatts Group To Repay $540 Million To Victorian Government Over Pokies
Tatts Group loses court proceedings ruled by the Victorian High Court
Based on a decision made by the Victoria High Court that rejected its demand to keep a windfall, Tatts Group will likely be forced to pay back nearly $540 million in lost compensation. This move is likely to put an end to its plan to make a special dividend payment to investors.
This will help boost the Victorian government reserves by nearly half a million dollars at a time when it is looking to pay for its expensive infrastructure projects. This is a huge gain for taxpayers because residents will now benefit from better infrastructure more quickly, as a result of this judgment from the court.
The news comes as a blow to the Tatts Group, which indicated that it will use the money to pay dividends to shareholders. The company’s share price fell by nearly 8 percent just after the announcement. Similarly, Tabcorp appealed for nearly $687 million in lost revenues, but the High Court rejected this appeal as well.
The case depended on whether the government of Victoria has mistakenly ended a monopoly deal, which was granted in 1994 by the Kennett Coalition government to operate pokie machines in the state, besides Crown Casino. In 2008, the management of the 27,500 pokies in the Victoria’s pubs was granted to various venue operators, instead of Tatts and Tabcorp. These amendments where made by the Brumby government under the assumption that it would not have to pay any compensation.
The High Court eventually ruled that Tatts was not entitled to any payment by the government because the issuance of a new gaming operators licence never transpired. This decision isn’t expected to affect the company’s ability to continue its existing divided policy because it did not recognise the funds as income.
According to Macquarie analyst Sam Dobson, while the decision comes as a surprise to many experts, Tatts was prudent not to recognise this expected payment as income by simply paying down debt upon maturity, rather than distributing the money to shareholders. He also added that net debt to EBIDTA metrics may be affected, but they will be manageable within the current capital position of Tatts without any added capital needs.
According to Shadow Treasurer Michael O’Brien, the Auditor-General established that the Labor government paid a large windfall to several big pokies operators already. Tabcorp shares rose by 0.35 percent after the ruling, while the company admitted that this decision ends the proceedings that ran since August 2012.