Tote hires Rothschild for sell-off advice

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The Independent Online

The Tote, the pool-betting monopoly, has appointed the investment bank NM Rothschild to advise it on a fund raising before it is sold to a racing trust.

The sale of the Tote, a Labour manifesto pledge, is expected to be included in next week's Queen's Speech.

The Tote, and the trust that will own it, expect to hold detailed talks with the Treasury in coming months over how much it must pay to buy itself out from state control.

The Tote's estimate of its value is about £150m, although rival bookmakers such as Ladbrokes and Coral, which want to be allowed to bid for the Tote, reckon it is worth several times that. The Tote's estimate is based on the organisation's so-called enterprise value, which includes £40m of debt on its balance sheet.

Rothschild has been appointed to examine the Tote's options for a fund raising. It is expected that the Government will allow the Tote a discount of 50 per cent of its value. So if the Government agrees with the Tote's estimate, then the betting group will have to find £75m, almost certainly financed by debt.

However, the Government may demand a much higher price if it decides to base its price on an estimate of what a competitive bidder would theoretically have to pay.

Once under the ownership of a racing trust, the Tote will be run for the benefit of the racing industry.

It says its commercial activities are limited by its current ownership arrangements. Set up by an Act of Parliament in 1928, the Tote is held in trust by its directors.

Exactly who owns the Tote and how much it is worth are expected to be hotly debated in Westminster, where several leading Parliamentarians, including Robin Cook, the former Foreign Secretary, are passionate racegoers.

One issue that will have a big influence on the Tote's value is an inquiry by the Office of Fair Trading into the Tote's monopoly over pool betting.

If the watchdog decides to revoke the licence or limit it to a few years, the Tote will argue that it should pay less to buy itself out. The OFT is expected to announce its findings soon.

The Tote operates at all the country's 59 racecourses and also offers telephone and credit betting. Last year it had turnover of £916m and profits of £96.7m. It also runs a chain of about 400 high street betting shops, for which many rival bookmakers would like the chance to bid.