Low offer for Tote may open up sale

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A racing industry consortium has made a formal offer to buy the Tote, the state-owned bookmaker, for less than the £400m the Government was looking for. The move sparked speculation that the Government could open up the sale to other bidders.

The consortium has been working on the bid for several weeks and submitted a proposal late on Friday. The group consists of Arena Leisure, a listed company that owns several racecourses, Racecourse Holdings Trust, part of the Jockey Club, and the Racecourse Owners Association. Another racecourse owner, Northern Leisure, was originally part of the consortium but dropped out last month.

Mark Elliott, the chief executive of Arena, said yesterday: "We can confirm that our consortium sent an offer letter late last week making what we believe is a compelling offer to acquire the Tote in its entirety. We are not commenting on valuation and are now looking forward to a response from the Department for Culture, Media and Sport."

The Government has called in the accountants PricewaterhouseCoopers, which valued the Tote at about £400m. However, the offer from the racing consortium is understood to be less than that, with speculation centring on a bid of about £350m.

The Tote, which gives a slice of its profits to horseracing, has been on the block on and off since the mid-90s. The Government's manifesto commitment to sell the Tote to a racing trust to safeguard future funding of the sport has not proved easy to carry out. It originally wanted to sell the Tote for a knock-down price of £150m to the racing industry, but the European Commission immediately declared that a cut-price sale would be regarded as illegal state aid.

If the racing consortium's bid is deemed too low by the Government and European regulators, the Tote could be sold on the open market and become subject to a bidding war. Gambling groups such as Gala Coral and private equity houses are thought to be interested, while Britain's two largest bookmakers, William Hill and Ladbrokes, are prevented from bidding because of competition concerns. If Gala, currently the third-biggest bookmaker, were successful in acquiring the Tote, it would rival its two larger competitors with about 1,900 shops in Britain. William Hill has 2,100 and Ladbrokes owns 1,900. Gala has added 100 shops over the past year and is close to acquiring Pagebet, a 60-strong chain, for £20m to £40m.

Founded in 1929 to offer pool betting, the Tote has grown to a chain of about 540 shops and is chaired by Peter Jones. Turnover rose 17 per cent to £2.2bn last year thanks to growth in fixed-odds betting terminals and an increase in the number of high-street shops.

The sale of the Tote comes at a time of frenzied corporate activity in the gambling sector, before the industry is fully liberalised next year. A week ago, Stanley Leisure, Britain's largest casino operator, agreed to be taken over by Genting, the Malaysian gaming group, in a £639m deal. The move came after Las Vegas-based Harrah's pounced on London Clubs International and agreed a £280m deal, thereby breaking up a proposed nil-premium merger between Stanley and its smaller UK rival.