tatts and tabcorp cop 3 billion loss

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    Tatts and Tabcorp cop $3b loss on pokiesMichael Warner and Stephen McMahon
    April 12, 2008 04:28am
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    GAMING giants Tabcorp and Tattersall's share prices had $3 billion wiped from their value yesterday, after fears of a drawn-out compensation battle with the Victorian Government.

    But it emerged yesterday Tatts trustees David Jones, Raymond Hornsby, William Adams and Peter Kerr sold their shares well before Premier John Brumby's decision to end its pokies licence.

    Mr Adams, a direct descendent of company founder George Adams, is believed to have parted with about $80 million in stock about a year ago.

    Tatts and Tabcorp are now headed for a Supreme Court showdown over their $1.28 billion compensation claim.

    Mr Brumby stunned the gaming industry on Thursday by announcing the Tatts-Tabcorp pokies duopoly would be dismantled after their licences expired in 2012.

    The shake-up means individual pubs and clubs will be free to bid for pokie entitlements in a $2 billion auction process, to begin in late 2010.

    Mr Brumby yesterday said his Government would not be paying compensation to Tatts and Tabcorp.

    Spooked investors sold the duo's stock down heavily.

    In heavy trade on their return to the sharemarket, Tabcorp lost 21 per cent to $11.33, and Tatts plummeted almost 27 per cent to $2.70.

    Under a contingency plan drawn up with the former Kennett government, Tatts and Tabcorp believed they were entitled to $1.28 billion if their licences were not renewed.

    The amount, calculated from a complex formula in the Gaming Machine Control Acts, would give Tabcorp up to $686 million and Tattersall's as much as $598 million.

    But Mr Brumby yesterday confirmed his Government had received advice that the payout could not be enforced.

    "The law is very clear, if you read the Act . . . if the companies wish to test that in the courts, they have legal rights and if they wish to exercise them, they will," he said.

    But gaming analysts were upbeat the legal challenge may eventually be successful.

    "The claim by the Victorian Government that neither operator is entitled to a refund may be posturing . . . to appease anti-gambling groups," Citigroup gaming analyst Jenny Owen said.

    "To make a refund after being ordered to by a court is politically more saleable than to hand over money willingly and without a fight."

    Tabcorp chief executive Elmer Funke Kupper is returning early from holidays for crisis meetings on Monday.

    Former Tattersall's chairman Ray Hornsby, who oversaw the little-known compensation deal in the early 1990s, declared there was no doubt the Brumby Government was obliged to pay.

    "I just don't see how they can walk away from that," a bemused Mr Hornsby said.

    "It was a condition of the Tabcorp float and I would have thought Tattersall's also had a fair and binding agreement.

    "That was the way it was signed off by the Victorian Government of the time."

    Opposition gaming spokesman Michael O'Brien said Tatts and Tabcorp had every right to expect the Government to abide by the contracts.

    "Business will not invest in a state where the Government can't be trusted to honour its agreements," Mr O'Brien said.

    Tabcorp, whose $700 million wagering licence is also at risk, has threatened to cut 1200 jobs and relocate to Sydney.

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