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Racing NSW boss Peter V’landys said the demerger would be a “financial disaster” for his industry.Credit:Getty

“Tabcorp disagrees with Racing NSW’s assertions. Nevertheless,Tabcorp is open to further discussing these concerns with Racing NSW consistent with the long-term and successful relationship between the parties.”

Mr V’landys confirmed he was considering legal action on behalf of his organisation when contacted for comment.

“My job is to protect the 50,000 participants in the NSW racing industry and as it currently stands this demerger would be a financial disaster for NSW Racing,” Mr V’landys toldThe Herald andThe Age. “Accordingly,we have a number of legal rights,and we will have no option but to enforce those rights unless Tabcorp guarantees the losses we will incur. It’s no secret that the wagering division has been performing poorly,so we are not going to be the ones left holding the failure they created.”

Tabcorp is preparing to split its struggling wagering business from its lotteries and keno business in May. The demerger,which was announced last July and will require shareholder approval,is designed to unlock value for shareholders.

But Racing NSW controls a key regulatory licence for Tabcorp in a major market,meaning Mr V’landys effectively has veto power over any deal. In exchange for a funding deal with Racing NSW,Tabcorp has an exclusive licence to have retail outlets in NSW until 2033,and a wider licence until 2097.

There were signs that Mr V’landys had concerns about the demerger whenThe Australian reported he was considering stripping the wagering giant of broadcast rights to show Australian horse racing overseas.

In a letter to shareholders,chairman Steven Gregg said the demerger was a decision that came after considering bids for the wagering,media and gaming services businesses fromUK betting giant Entain,private equity giant Apollo,and wagering technology group BetMakers.

“After assessing the proposals carefully in the context of the strategic review,the board determined that it preferred the merger on the basis that it presents the most certain and timely path,with lower regulatory impediments,to maximise value for Tabcorp shareholders,” Mr Gregg said.

An independent report by Grant Samuel in the scheme booklet said the division could have a value of $2.1 billion to $2.7 billion,well below what was offered by suitors for that division last year.

Under the plans,shareholders in Tabcorp will keep their existing shares as well as receive one The Lottery Corporation share for every Tabcorp share that is held on the record date,slated to be Wednesday,May 25.

TAB’s wagering division suffered a 10 per cent decline in revenue ($1.07 billion) and 67 per cent fall in earnings to $43 millionin its half-year results.

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