Tabcorp’s keno and lottery units, which the Australian gaming company recently said will be spun off, could be worth between $6.97 billion and $9.19 billion, according to J.P. Morgan analysts.

Even at the low end of that range, the keno and lottery arm, according to the bank’s estimate, is worth far more than the media and sports wagering businesses that previously lured multiple bidders. Earlier this year, the Australian company announced a strategic review, which market observers initially expected would result in the divestment of the struggling media and sports betting businesses.

Private equity firm Apollo Global Management (NYSE:APO), gaming giant Entain Plc (OTC:GMVHY) and local sportsbook operator BetMakers made offers. None of those proposals exceeded $3.1 billion, confirming Tabcorp is extracting significantly more value from parting with keno and lottery outfit.

The company announced earlier this month it’s moving forward the once sought after media and sports betting unit while parting with the keno and lottery operation. The demerger process is scheduled to be finalized by June 2022 and Tabcorp has yet to announce an official valuation for the transaction.

Tabcorp Retains Some Risk

Assuming the transaction comes to fruition, Tabcorp investors will receive shares in the newly public keno/lottery unit while retaining exposure to media and sports wagering arms – businesses analysts see as scuffling.

Tabcorp is levered to declining segments of the wagering industry, such as retail and tote,” said the J.P. Morgan analysts. “Its exposure to growth segments, such as fixed-odds, online and sport, is shrinking, as corporate bookmakers have garnered the most market share.”

In highlighting the benefits of the demerger, Tabcorp says it provides an opportunity for lotteries and keno and media and sports betting to be valued on a standalone basis. That’s something shareholders complained wasn’t happening when pushing for the strategic review.

With the keno/lottery and media/sports betting enterprises being separated, Tabcorp previously said both outfits could enjoy the fruits of mergers and acquisitions activity down the road, though it’s not yet clear if or how that consolidation will take shape.

Possibly Providing a Template

Whatever the valuation of Tabcorp’s keno and lottery business comes in at, it could provide a gauge for other companies considering listing lottery units in Australia.

Recently, Scientific Games (NASDAQ:SGMS) said it will divest its lottery and sports betting businesses. While those actions could come in a variety of forms, there is speculation that the Las Vegas-based company could list its lotto arm in Sydney.

Should the Tabcorp spinoff occur prior to Scientific Games commencing an Australia offering, which isn’t set in stone, the former could bring the latter a valuation template of sorts though it’s expected the Scientific Games business will be valued at a lower price tag than its Tabcorp counterpart.

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