Billionaire pub baron Bruce Mathieson, who runs a pub and gaming machines joint venture with grocery giant Woolworths, has emerged as a big winner in a Victorian Government auction of pokie licenses, with experts saying the average price paid by bidders was half of what was expected.
The auction was part of the Victorian Government’s new gaming machines licensing regime.
Currently, just two companies, Tabcorp and Tattersalls, are able to operate Victoria’s 27,5000 gaming machines. But under a new regime that will come into force in 2012, the Government will auction individual licences for every machine via a competitive auction process.
The auction was conducted in May and the Victorian Government has revealed it took $981 million from the license, which is about half the amount most analysts had predicted the Government would take.
The average price paid per machine license was just $39,000, with many machines selling at the bargain-basement reserve price of just $5,500.
Experts including Monash University researcher Charles Livingstone has estimated the average machine produces about $100,000 in profit each year, which will now be split 50/50 between the Government and the license owner.
ALH Group, which is owed 25% by Mathieson and 75% by Woolworths, took up its full entitlement of 4,813 machines, with most bought for an average price of $33,500 according to reports.
However, Mathieson told Fairfax Radio that the price paid was “a pretty fair price” and said the short 10-tenure of the licenses and other conditions may have weighed on the price the Government received.
But Matheison, a passionate supported of the AFL club Carlton, has caused controversy in Australian Rules circles by terminating the leases of ALH pubs leased to the Richmond and Western Bulldogs football clubs, and leasing the pubs to Carlton.
Carlton will also take over the lease at a club formerly run by the Brisbane Lions Football Club.
Richmond and Western Bulldogs claimed the decision has taken away a vital source of income.
”It’s terribly disappointing to see our inner-heartland being taken away by the Bruce Mathieson organisation on behalf of one of our kindred clubs for their commercial benefit,” Western Bulldogs chief executive Campbell Rose told The Age.
However, the auction has proven to be a big winner for most other footy club which operate pubs and clubs as most have picked up gaming machine licences for rock-bottom prices.
For example, The Age says Melbourne Football Club’s board allocated $4 million for 92 machines at the Leighoak club, but ended up paying just $370,000.
James was the editor and publisher of SmartCompany and LeadingCompany for five years. He is now the Australian Financial Review‘s companies & markets editor, and a former BRW editor.
