How the TAB was Privatised

The first Australian TAB business was in Victoria. Operations commenced there 11 March 1961. New South Wales TAB did not commence until 9 December 1964 following a Royal Commission of Inquiry as to the likely effectiveness of a TAB system. During 1993 the Government of Victoria again led the way when it decided to privatise its TAB.

That is, it changed the statutory authority into a commercial corporation and set out to sell shares in the corporation on the stock market. In August 1994 TABCORP Holdings was therefore listed on the Australian Stock Exchange. Under the new arrangements there was greater flexibility for its operations and a potential for a significant increase of revenue to the Racing Industry of Victoria. The latter was of considerable concern to the Industry in New South Wales.

The Racing Industry of Victoria was already strong with its tremendous Spring Carnival and now looked to have the capacity to greatly outgrow and potentially weaken the New South Wales Industry. In practice TABCORP did perform well financially and by June 1996 its share price had more than doubled while that year the Victorian Industry received $169 million compared to $124 million paid by our TAB to the New South Wales industry.

Back in 1994 I already knew that although we had a stronger base of customers, top class staff and agents, as well as better technology, we could not match the Victorian revenue potential having regard to the way we were configured.

During the year I took the opportunity of a meeting, on an unrelated topic, with the New South Wales Premier, John Fahey, to mention my concerns. He showed interest and we set up another meeting that was also attended by Bob Charley, then Chairman of the Australian Jockey Club. It was agreed to look more closely at the issue once the upcoming State elections were over.

During the interim I attended the January 1995 Gold Coast Magic Millions Carnival. I was there in my interest as a thoroughbred horse breeder but I was also looking at the operations of the racing events that were important to our TAB.

At the horse auctions the former Sydney Turf Club Chairman, Jim Fleming, approached me. Jim asked that I join him and a few others for a discussion on a possible TAB privatisation in New South Wales. I agreed to go along but emphasised that I could only be an observer due to my responsibilities as TAB Chairman. I was also mindful of the confidential nature of the discussions I had undertaken with Premier Fahey.

The informal gathering, organized by Jim Fleming, was held around the tray of a horse float. Others present included Jack Ingham and Rob Ferguson. The meeting decided that Jim should seek a meeting with whoever was in office after the election to emphasise the potential benefits of privatisation for all TAB stakeholders. Many were surprised when John Fahey was defeated and Bob Carr became Premier on 4 April 1995.

Fortunately I was able to quickly see the new Premier and bring the issue back to the level reached with the former leader. In the event there were a number of meetings including Bob Charley and Jim Fleming over the ensuing months with the New South Wales Treasurer, Michael Egan, also becoming involved. Michael supported the idea subject to the Racing Industry agreeing that the arrangement became finality and that it would not seek further Government intervention at some future point.

A necessary first step though was to restructure the TAB from a body created by statute to a corporation owned by the Government. New South Wales had an established Cabinet process for such matters and it went under the name of Microeconomic and Government Trading Enterprise Reform Committee. The Committee agreed that the TAB should become a corporation and established a Steering Committee to accomplish the task.

The Steering Committee was chaired by Paul Broad, Managing Director of Sydney Water and comprised representatives of the Premier, Treasurer, Minister for Gaming and Racing, and the various Departments, as well as myself and Allen Windross from the TAB. The complex process of corporatisation took almost a year but it was an important move towards sale of the TAB. As a major policy issue the Government also sought the views of those outside the bureaucracy who had an understanding of the racing and betting scene.

One of those consulted was former Premier, Barrie Unsworth. Barrie knew the Industry well because of his role as General Manager of Racing Radio – 2KY. He was also a TAB customer and often attended race meetings. After reflection Barrie decided to support privatisation. The remaining concern was the possible reaction of the other parliamentarians in the Government. Barrie was asked to visit each of them so as to explain how privatisation would work.

In turn Barrie requested that I accompany him to comment upon any detailed TAB issue. This was done and in April 1997 the Premier announced the policy to sell the TAB. The necessary legislation passed both houses of the New South Wales Parliament and was given the Governor’s assent 1 July 1997. There were no direct representatives of racing on the new Board of Directors although many of us had a keen interest in the sport.

One important common factor with all of us was knowledge of Company Boards and their responsibilities. The new Chairman, I was made Deputy Chairman, was Gary Pemberton. I had put forward his name and it was quickly agreed as the Government knew the excellent way that Gary had handled the Qantas privatisation as its Chairman. Gary was another who understood racing and betting, and he had long been a regular customer of Agent Barry Dillon at Manly TAB # 1.

After a call for expressions of interest the Government retained the financial houses, ABN AMRO Inc. and Merrill Lynch and Co. to jointly manage the sale of the TAB on the stock market. A target for share listing on the market was set to be 22 June 1998. The eleven months leading up to the listing proved to be a period of intense activity for the Board and the senior staff. One of the many necessary activities was ‘Due Diligence’.

One of the parts of this process was the allocation of a number to every statement that would appear in the Public Share Offer Document. Each numbered statement was the subject of a study to ensure it was completely accurate and capable of full verification. Another activity was the negotiation of the Racing Distribution Agreement (RDA) with representatives of the Racing Industry who were headed by Bob Charley from the Australian Jockey Club.

All of these things had to be done while still keeping our TAB business running effectively. As a consequence the meetings regarding the sale were often scheduled for early mornings and late nights. The RDA discussions were particularly complex. At the outset the Racing Industry was keen to have similar arrangements to those in Victoria that were called the Joint Venture Agreement or Joint Venture. Under the Joint Venture representatives of Racing were involved in the management of the TAB business.

In NSW, however, concerns were raised about a Joint Venture as it effectively meant that persons without ultimate responsibility to the company shareholders were involved in business decisions. The Racing Industry representatives eventually accepted that a Joint Venture was ‘off the table’. Another complicated issue arose when TAB decided to buy SKY Channel and include it in the share float. At first it was hoped Racing would become a dual owner but this proved to be too complex to achieve.

Gradually all the issues were resolved and we reached the actual share float. The public interest was huge and the company that had the contract to handle phone enquiries was overwhelmed. The media and the public generally could not understand why the TAB’s telephone call centre, one of the best in the country, was not involved. After many days of great stress the public interest was eventually satisfied. Then, on schedule, TAB Limited listed on the Australian Stock Exchange in the morning of Monday 22 June 1998. Remarkably the privatisation was accomplished in a similar period of time after the Victorian effort compared to the commencement dates 30 odd years earlier.

That is TAB start ups: Victoria March 1961, NSW December 1964. TAB Privatisations: Victoria August 1994, NSW June 1998. Perhaps this was some obscure type of pointer to the fact that the businesses would eventually be merged.

J. R. (Ross) Cribb