Glenn Freeman: I'm Glenn Freeman for Morningstar, and I'm joined today by Morningstar Equity Analyst, Dan Ragonese.

Dan, thanks for joining us today.

Dan Ragonese: No problem.

Freeman: Now, Dan, today we are talking gaming companies Tatts and Tabcorp who are going through a merger. Can you just tell us where this process is up to at the moment?

Ragonese: Yeah. It's been a bit of a never-ending saga that's going for over 12 months now. So, there have been a number of regulatory approvals that they have had to go through and for the most part, that seems to have all been resolved. The only real outstanding item is the shareholder vote, which is scheduled to take place in around a week's time and we don't see that being a major hurdle. We think that the deal is likely to go through.

Freeman: And why is this process happening? What are the potential upsides for the new entity that could emerge?

Ragonese: Yeah, it's really a function of the changing competitive environment. So, over the last 5 to 10 years digital wagering has really taken – almost taken over in a sense. And Tatts and Tabcorp by legacy have got their large bricks and mortar retail wagering outlets.

So, it's really a matter of them being able to combine those wagering businesses and generate a substantial amount of synergy. So, they should be able to bring down their operating costs and put them in a better position to compete with the digital bookmakers.

And in addition to that from Tabcorp's perspectives, the addition of the lotteries business is a big plus as well. It's highly cash-generative, very defensive and what they are likely to do is use the strong cash flows from that business, reinvest that into the wagering and improve their digital offering, their capabilities, increase their marketing efforts. And it's really going to transform the whole business.

Freeman: And lastly, what's your view on the merger? Does it affect our moat rating and some of the other key metrics?

Ragonese: Yeah. Look, they are both narrow moat, both very high-quality stocks and we see their competitive position improving upon completion of the merger. They are going to have exclusive licenses for both lotteries and the bricks and mortar wagering across almost all states in Australia.

They are going to be a much more diversified gaming company with exposure to lotteries, keno, wagering and just the much larger scale business. So, we see them with a much more diversified and stronger profile and with substantially more firepower to reinvest into the business and improve their digital offering.

Freeman: Thanks for your time today, Dan.

Ragonese: No problem. Good chatting with you.

Freeman: I'm Glenn Freeman for Morningstar. Thanks for watching.