Betfred’s bid boosted by cash strength
BETFRED agreed to pay £265m to buy government-owned betting pool the Tote yesterday, a substantial step up from previous estimates of £230m.
The sweetened offer gave the UK’s fourth-largest bookmaker victory in the race to own the 82-year-old Tote and exclusively operate the pool betting operations at all UK racecourses for the next seven years.
Betfred’s bid states that it will pay both the Treasury and the racing industry an upfront £90m each. It has committed to paying off £60m of the Tote’s debt; making a £25m lump contribution to its pension fund, and paying racing a generous £11m in the first year and £9m per year in the next six years.
While Betfred will fund the deal wholly from bank debt, it has said it has partnership banks with the funding ready to go when needed.
That clarity of funding, as well as its large proposed cash payments, was a significant factor in gaining government’s support.
Betfred, founded in 1968 by brothers Fred and Peter Done, remains in private hands, but its 2010 accounts show it generated revenues of £3.5bn in the year to March 2010, while its annual pre-tax profit is about £10m.
It says it expects to make £4bn in revenue this year.
Sir Martin Broughton’s newly formed investment vehicle, Sports Investment Partners, had set out an alternative vision of floating the Tote on the London Stock Exchange to raise £100m equity capital to fund the deal. It had offered the racing industry a ten per cent stake in the public Tote – though racing would have to waive its 50 per cent of the proceeds of the Tote sale in return.
However, Betfred was thought to be a stronger bidder on most financial counts, while SIP’s bid also ran into concerns over EU state aid laws.
Betfred has also said the total £65m in annual revenue it will pass to the industry over the seven years of the Tote licence outweighs the cash benefits racing would have received from Sir Martin.
Done was clear about his determination to win the Tote despite the lack of industry support. But he has kept his pledge to create an advisory board for the Tote, the Tote Racing Development Board, where the racing industry will be represented.