Everyone’s a winner if Tabcorp/Tatts deal sealed ahead of the Melbourne Cup

FAIRFAX. SPORT. GOLD COAST. HORSE RACINGMagic Millions horse racing at the Gold Coast Turf Club.Race 6 Conrad Jupiters Magic Millions 3YO Trophy winner 13 Tempest Tost with jockey Darren Gauchi (in pink cap).Picture by Paul Harris.Saturday 10 January 2009. MELBOURNE, AUSTRALIA – OCTOBER 19: Tabcorp Chair Paula Dwyer and Tatts Group Chairman Harry Boon pose for a photo with David Hayes’ Oaks runner Harlow Gold on October 19, 2016 in Melbourne, . (Photo by Jesse Marlow/Fairfax Media)

If all goes to plan, the long-awaited Tatts/Tabcorp merger will be consummated on November 1, just days before the Spring Racing Carnival’s big week kicks off with Derby Day on November 4.

And the good news is that there will be plenty of winners before any horse even enters the starter’s gate. And, as is often the case with corporate mergers of any size, you don’t necessarily lose just because you backed the wrong horse.

Only Tatts chairman, Harry Boon,will make the jump to the board of the merged entity. But not to worry, his fellow Tatts directors will each receive $92,500 “non-compete payment” on implementation day, according to the scheme booklet.

That will ensure they are restrained from setting up a multi billion dollar competitor in the 12 months following the merger.

Current Tatts CEO, Robbie Cooke, will also be unsaddled by the merger. But he will receive $2.091 million in lieu of notice, a share of his $2.091 million variable incentive payment for this year “at the discretion of the board”, plus long term performance rights.

Cooke is also in line to receive part of the retention bonus paid to senior staff to stick around despite the merger circus.

A retention pool of up to $20.5 million was approved by the Tatts board, and if all executives who were offered the “retention arrangements” gets paid out, it will cost the merged group $6.4 million to reward its loyal staff.

But this is chicken feed compared to what will be doled out to the hired help working on the merger.

Tatts helpers: Goldman Sachs, Clayton Utz, Grant Samuel, PwC Securities and KPMG will share in $70 million worth of fees if the merger is implemented, and $55 million worth of fees if it isn’t.

That’s only $1 million more than the merger bill that David Attenborough’s Tabcorp has incurred so far.

We don’t need to wonder who will get the lion’s share of this loot from the Tatts team. Grant Samuel’s fees are fixed at $1.85 million plus costs, and PwC’s costs so far have barely reached $1.1 million. So we’re guessing drinks are on Malcolm Turnbull’s former colleagues at Goldies. Debt Pack

You could never accuse former Post boss, Ahmed Fahour of lacking ambition.

With the Postie job now a distant memory Fahour has really ramped things up at the ASX-listed group he chairs, Pro-Pac.

On Monday it announced the acquisition of fellow packaging manufacturer IPG – from its executive team and private equity owners, Advent Partners – for $177.5 million. This is more than twice the market value of Pro-Pac.

“The opportunity to combine two very complementary businesses will deliver significant long-term value to Pro-Pac shareholders,” said Fahour who is still under water on the $4.3 million worth of shares he acquired in 2014 after joining the board.

Despite Fahour’s best intentions, the packaging group needs a little TLC.

Two profit downgrades this year left its share price trading at its lowest point since 2011.

???Not that Fahour will have any trouble convincing investors of the merits of this deal. His good mate, billionaire Raphael Geminder, owns 49 per cent of Pro-Pac, and CBD’s favourite corporate raider Gary Weiss is also a director.

Geminder has promised to support the $55 million equity raising at 34c a share, to help pay for the acquisition.

We can assume Geminder also supports the $70 million of additional debt – which will be needed to help pay the $117 million cash consideration for the acquisition – plus $60 million worth of shares.

It means that Pro-Pac’s net debt will rise 500 per cent to $85.5 million, which is more than the company was worth before the stock recommenced trading this morning.

Let’s just hope the IPG transaction, if approved by investors, doesn’t go the same way as Pro-Pac’s $6 million purchase of fresh meat packaging provider, Eco Food Pack (EFP). That adventure, which predates Fahour, ended in a nasty spat in the Supreme Court this year. Bubble trouble

You know the regulator’s attempts to tame the property bubble are starting to get traction when the man who topped the rich list last year – property developer Harry Triguboff – starts warning in the press that “ns could lose an enormous amount of wealth” from the downturn in apartment prices and calls for government intervention to stem the fallout.

Having ridden the residential property boom to the top of the wealth list, is Triguboff admitting he needs government support to stay there?

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