UK GOVERNMENT PUTS THE TOTE UP FOR SALE

7 March 2008

Horse racing consortium bid rejected


The long-running saga of Britain's state owned the Tote bookmaker may have entered it's final chapter this week with the UK government's announcement that it has rejected a bid from a horse racing consortium and is putting the company up for public sale. Government spokesmen said that bids would be considered immediately.

Set up in 1928, the Tote operates Britain's pool betting system and has around 540 betting shops and representatives at all 59 UK racecourses, together with an online betting division.

Reuters reports that the fate of the Tolte has been in the balance for over three years, and that the government's decision will not sit well with the racing industry following its pledge in 2001 to sell it to the industry. That deal fell apart four years later when the European Commission said the price was so low that it constituted state aid.

PricewaterhouseCoopers then valued the Tote for the government at a reported GBP 400 million and the racing industry was invited to put together a bid on that basis. The response was an initial offer of some GBP 320 million in 2006, which was rejected. The consortium then partnered with Tote management and the private equity division of the Lloyds TSB bank to make another bid early in 2007.

This time the government was reportedly unhappy with the level of Lloyds TSB's involvement and the consortium was told to rework the plans, leading to a new bid being put forward last September and now rejected as well.

Industry observers expect a wide range of companies and individuals to be interested in going after the Tote. Competition laws will probably rule out giants like Ladbrokes and William Hill but the privately owned Gala Coral has already offered to buy the business while BetFred and Paddy Power are also among those gambling firms expected to try their luck.

There are fears that a fall off in business caused by economic conditions in the UK may impact on the price the eventual purchaser is prepared to pay, however. Reuters quotes estimates of between GBP 200 and 300 million. Another option may be along the lines suggested by Paul Dixon, president of the Racehorse Owner's Association who has proposed a plan to split the Tote between the horse racing industry and a willing industry partner.

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