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Lotteries sale a boon for Tatts. -

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MARK COLVIN: The odds are stacked against punters but they're looking better this evening for
Australia's biggest lotteries operator. The Tatts Group which grew from Tattersall's in Victoria
has just bought NSW Lotteries for almost a billion dollars from the State Government.

That gives Tatts more than 80 per cent of the national market for lotteries products and a presence
everywhere except South Australia and Western Australia.

The New South Wales Government says it will use the sale proceeds to pay for more nurses, teachers
and police officers and to retire debt. The Tatts Group is reassuring its shareholders that it
hasn't paid over the odds for the business.

Simon Santow reports.

SIMON SANTOW: The Tatts Group wouldn't quite call it the deal of the century but for chief
financial officer Ray Gunston there was plenty to smile about today.

RAY GUNSTON: That gives us six jurisdictions, about 13 million adults within that jurisdiction and
now gives us about 80 per cent of the lottery market in Australia.

SIMON SANTOW: And if the goal is market domination the company is getting pretty close to its
objective.

RAY GUNSTON: Queensland is more or less an exclusive arrangement. Victoria we are sharing that
arrangement. We have in the order of about 90 per cent or more market share there but there is
another operator there. And the Northern Territory is sole operator. And the other two
jurisdictions we do share with other operators.

SIMON SANTOW: Analyst Rohan Sundram is from Austock. He sees plenty of upside in buying NSW
Lotteries.

ROHAN SUNDRAM: It fits quite well with their existing lottery operations. They've already got the
corporate and systems infrastructure to run these businesses. So we would expect the synergies to
be pretty significant over the next several years.

SIMON SANTOW: But they haven't paid too much?

ROHAN SUNDRAM: I wouldn't say they've got a bargain. I think $850 million is a very tight price
given that market expectations were around $600 million to $700 million. But I think the market has
underestimated the longer-term synergies available for Tatts.

And if you incorporate an expected stronger revenue growth under Tatts' control then potentially
this licence is worth over $1 billion. So on that basis I think Tatts has paid a reasonable price
given their track record.

SIMON SANTOW: The company knows it will have to target revenue growth because the conditions of the
sale prevent Tatts from making staff redundant for the next three years. Similarly newsagents will
retain their lion-share of retail sales of lottery products at least in the short term.

Chief financial officer Ray Gunston.

RAY GUNSTON: We would think that if you're talking about sort of normal growth in lotteries in the
space of sort of 2 to 3 per cent we'd be hoping to get something a little bit more than that in New
South Wales for a period of time as you ramp up that per capita spend, yeah.

SIMON SANTOW: He says that will bring benefits for punters.

RAY GUNSTON: As you grow the total pool size because there's a regulated return naturally the
players' prizes increase by the amount of the increase in the size of the pools. And that's the
benefit and that's why we have national blocks for a bulk of the games; blocks being the
consolidation or the integration or combination of the prize pools out of each of the states.

SIMON SANTOW: For the sellers lotteries will still produce taxes of around $330 million a year. But
the State Government will no longer bank its annual dividend of about $50 million.

New South Wales Treasurer Eric Roozendaal:

ERIC ROOZENDAAL: The final bid price was well in excess of what we believed to be the NPV (net
present value) value of NSW Lotteries. It's a good, value outcome for the people of New South
Wales.

It will allow us to put some money back into frontline services - into police, nurses and teachers
and to strengthen the state's balance sheet going forward.

This is a strong result for New South Wales. It builds on our protection of the AAA credit rating.
It builds on our relatively strong result with the Commonwealth Grants Commission and I think
underpins the strength of the New South Wales Government particularly with fiscal management.

SIMON SANTOW: The Coalition Opposition supports the sale but it says taxpayers ought to be wary
about just how well the Government will spend the billion dollar proceeds.

MARK COLVIN: Simon Santow.