Racing backers named for Tote bid

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The Independent Online

The racing consortium seeking to buy The Tote has shortlisted South Africa's Phumelela and Australia's Tabcorp as potential backers for a renewed bid before a crunch meeting at the Department for Culture, Media & Sport (DCMS) on Monday.

At the meeting the Government is expected to outline how it wants to take the sale forward. Tote management are also expected to attend the meeting.

The sale process has been becalmed since the consortium's initial offer of £310m was rejected by the Government in September because it fell short of the £400m valuation put on Britain's pool betting monopoly by PricewaterhouseCoopers.

Arena Leisure - which operates a quarter of Britain's racing fixtures - subsequently pulled out of the consortium, but it still includes the Racecourse Holdings Trust (RHT), whose tracks include Cheltenham and Newmarket, the Racecourses Association and the Racehorse Owners Association (ROA).

It is thought that ministers remain keen to sell the business to racing, to honour a manifesto commitment made by the Labour Government.

However, they are not yet sold on the idea of outside money coming in from a foreign operator. That could create a sticking point at the talks because some members of the consortium are known to be reluctant to get involved with a bid that is heavily financed by debt.

The ROA has lined up a group of high net worth individuals to ensure owners have a stake in a privatised Tote.

But it is understood that certain members of the consortium feel it needs to find between £100m and £200m in equity to meet the Government's asking price, with the remainder funded by loans. It would be difficult for members to raise that amount without the help of an external backer.

Some racecourses believe that were the proportion of debt to be too high, the dividends paid by The Tote to racing could be threatened, defeating the object of buying the business.

Phumelela, operator of South Africa's biggest pool betting business, has close links to the RHT. It is involved in selling British racing internationally with Racing UK, the satellite racing channel that is owned by 30 courses including those operated by the RHT. It is thought to be in the lead over Tabcorp, which has a wide range of gaming interests including sports betting and casinos.

The consortium has sought to sell its proposals by stressing that a racing bid would protect employment at the business's Wigan base.

The Tote's management, led by Trevor Beaumont, has been keen to pursue a sale to an employee trust and recent presentations have bought it a seat at the table, with the DCMS keen for management and staff to have some involvement in the final proposals.

Gala Coral is known to be closely watching the situation, after submitting a £325m bid to buy The Tote's chain of 540 betting shops. Under its proposals, it is envisaged that racing would be able to buy the pool betting, telephone and internet betting operations for as little as £80m. But the Government is reluctant to proceed with the bid if a deal with racing can be secured. A deal with Coral could also generate opposition among Labour MPs in the North-west if significant numbers of jobs were put at risk.

If the Racing Consortium bid were to finally fail, an auction would be the likely alternative, which Coral would still be the favourite to win. It has already put together a multimillion-pound investment plan to refurbish the betting shop chain.

Any attempt to sell The Tote on the cheap would almost certainly land the DCMS with another investigation by Europe.

None of the parties were prepared to comment before the meeting.