A merger is on the table as Tatts and Tabcorp both go into trading halts

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Listed gambling companies Tatts and Tabcorp have both gone into trading halts amid reports they are working on a merger.

The two had talks last year about creating a massive gaming enterprise but negotiations stalled.

Tatts, with its lotteries business, has a market cap of $5.34 billion and Tabcorp, with its TAB betting agencies, $4.14 billion.

Together, they would have combined revenue of $5.2 billion.

In the latest full year results, Tabcrop post a net profit after tax of $169.7 million on revenue of $2.188 billion. Tatts had a full year profit of $263 million on revenue of $3.03 billion.

Today both companies made separate statements to the ASX, with similar wording, asking for a trading halt pending a “potential change of control transaction”.

According to Street Talk in the Australian Financial Review, the two companies are looking at a friendly transaction to be done via a scheme of arrangement.

Lately, Tabcorp profits have been subdued by the cost of defending money laundering allegations and by investment in the UK.

The company in 2016 spent $14.4 million on establishing Sun Bets, a UK online betting business in a joint venture with News Corp’s The Sun newspaper.

The legal costs for civil proceedings by Australia’s financial intelligence body AUSTRAC came to $13.6 million.

Tabcorp also expanded its non-traditional business through the $128 million acquisition of INTECQ Limited, an electronic gaming machine developer and marketer.

Earlier this year Tatts and Tabcorp lost their final legal battle to be paid a combined $1.2 billion in compensation for lost control of poker machines in Victoria.

The High Court backed the Victoria government against compensation claims over a 2008 decision giving control of poker machines operated by Tatts and Tabcorp to pubs and clubs.

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