Tatts shares rallied in the wake of the revelation today, climbing more than 5 per cent in early trade. They lost some ground mid morning but were still up 3.6 per cent about 11am at $4.41. Tabcorp, which struck its merger deal with Tatts in October, had been buying Tatts shares on the market in recent weeks to strengthen its hand should a rival bidder emerge. The new suitor wants to buy Tatts' lotteries business and a spin off its wagering arm. Pacific Consortium is proposing to pay $3.40 in cash for each Tatts share, and offer investors one share in the proposed gambling division to be spun off. It values that business, dubbed Wagering & Gaming Co. for now, at $1 to $1.60 a share. That means each Tatts share is valued at $4.40 to $5 under the offer, compared with a closing price for Tatts shares yesterday of $3.92. According to market speculation this morning, Macquarie put a proposal to the Tatts board before Tabcorp struck its merger agreement with Tatts.