Tatts Group Ltd and Tabcorp Holdings Ltd confirmed this week that they had been involved in merger talks - however these talks have failed and no merger is foreseen in the near future.
Both groups were open to the idea of consolidation due to a number of market factors, including an increase in the number of mergers and acquisitions recently seen in Australia, as well as a drop in local currency value.
In addition, both Tatts and Tabcorp have been hit by the deregulation of gambling licenses since 2012. This issue is still tied up in Australian courts, but the effect has been felt.
Tatts and Tabcorp have a combined market value of A$9.7 billion.
Prior to the announcement that the talks had failed, there was much speculation in the Australian press regarding how the merger would look and how it would affect the local gambling landscape.
Reasons for Merger Failure
Before trading commenced on Monday this week, the companies made separate statements explaining that they had been unable to reach an agreement over a merger deal.
Tatts said the talks had ended and "there are no further discussions taking place between the parties relating to a nil-premium merger of equals or any other form of corporate transaction with Tabcorp."
Tabcorp's statement read: "Tabcorp confirms that while confidential discussions have taken place regarding a potential merger, the companies were unable to agree mutually acceptable terms and those discussions have ended."
"There are no further discussions taking place between the parties relating to a merger or any other form of corporate transaction," added Tabcorp.
Analysts Comment on Potential Merger
Despite the announcement that talks are on the rocks for now, analysts still think there is reason to believe that a deal could be struck between Tatts and Tabcorp in the next 12 months.
It is thought that pressure from key investors could force the sides to return to the negotiations table and soften their stance on some key issues.
While a merger of such gigantic proportions will definitely attract the attention of the Australian Competition and Consumer Commission, the groups will meet less obstacles if they argue that they will be jointly tackling the competition in the online gambling sphere.