UNiTAB, Jupiter consider pooling their bets

A successful marriage would rank the pairing second in size to Victoria's Tabcorp, the largest Australian gaming operator with a market value of $3.8 billion.

Both companies remained tight-lipped about their plans yesterday and expect to decide the fate of the proposal during the first half of 2003.

``At this stage, it is uncertain whether these discussions will result in an agreement to pursue a merger," the companies said in a statement.

Jupiters has identified its online sports betting business Centrebet as a promising growth prospect and believes this will benefit when merged with UNiTAB's business, formerly TAB Queensland. Global instability has clouded the outlook for Jupiters's casino business, forcing a recent profit warning for 2002-03 as the company looks for other areas of growth.

A merger would be subject to the approval of the Queensland Government.

Jupiters chief executive Ron Hines said the merger discussions with UNiTAB were publicly acknowledged because the company was in the throes of another deal, heightening its disclosure obligations.

It is close to assuming control of the Breakwater Islander Trust in a $28 million takeover. Breakwater's main asset is the Townsville Hotel & Casino, managed by Jupiters.

Mr Hines was adamant a deal with UNiTAB would be on an ``equal basis" rather than a takeover. It has recruited Salomon Smith Barney as advisers. UNiTAB is being advised by Investec Wentworth.

Some analysts believe experience in both gaming and wagering would strengthen their prospects in overseas markets such as the UK.

Credit Suisse First Boston gaming analyst Moira Daw said UNiTAB had a strong management record and could end up running the merged group.

Other casino operators such as Publishing and Broadcasting and Tabcorp have cast an eye over Jupiters, but it has protected itself from being a takeover target by launching this week's pre-emptive strike.

``There is a high degree of parochialism in this and both know the Queensland market well," one analyst said.

Another analyst said there would be some cost savings in areas such as gaming machine monitoring and linking software. But he warned there were no great synergies of note.

In October, investors savaged Jupiters for issuing a gloomy profit outlook, warning that earnings for the six months to December 31 would be 10 per cent lower than in the previous corresponding period. A downturn in tourism and conventions has hurt the business.

Jupiters previously reported its highest ever full-year net profit in 2001-02 of $78.1 million, mostly from growth in Keno, Centrebet and the high roller business.

The company expects revenue from Centrebet to increase by 30 per cent in 2002-03.