Government to outline auction plans for Tote

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The horse racing industry's bid for the state-owned Tote bookmaker is expected to be formally rejected by the Government today. Instead, ministers are expected to outline plans to put the Tote up for auction.

Gerry Sutcliffe, the Sports minister, will outline the Government's proposals for the computerised Totalisator betting system to MPs this morning in the latest twist in the long-running saga. He is expected to rebuff the bid from a consortium including the Racecourse Association (RCA), the management of the Tote and LDC, the private equity arm of Lloyds TSB.

Earlier this year, Andy Stewart, the racecourse owner and founder of Cenkos Securities, revealed that he was keen to hold talks with ministers about floating the Tote on the AIM stock market. However, he said the slump in the value of gaming companies meant the business could be worth as little as £260m.

But racing industry insiders believe several British and overseas companies would be interested if the Government went ahead with an open auction and a number of gambling concerns are expected to throw their hats into the ring. Gala Coral has already expressed an interest, while Paddy Power and BetFred are also likely to make a move, although the Government may have to lower its £405m price. William Hill and Ladbrokes may be prevented from buying the Tote, which operates 540 high street betting shops and 59 shops on racecourses, on competition grounds.

Privatisation of the Tote was first mooted in the 1980s and the Government vowed to sell the bookmaker to the racing industry in 2001. However, an attempt by the Department of Culture, Media and Sport, which is responsible for the business, to offload the Tote to the industry in 2005 fell foul of the European Commission, which said the price was so low it constituted state aid.

After this failed attempt, the Tote was independently valued by PricewaterhouseCoopers at about £400m and the Government invited the racing industry to table a bid. An initial offer of £320m was rejected in 2006. The industry consortium returned in partnership with the Tote management team and made a further bid backed by LDC. But ministers told the consortium to rework its plans as it was unhappy at the level of involvement by Lloyds. A revised offer, thought to be near £400m, was tabled in September.

Lottery-infrastructure companies such as Nasdaq-listed Scientific Games, Intralot, Opap or Lottomatica, the Italian owner of Gtech, have all been mentioned as potential bidders.