The bookmaking chain has raised the money from a number of City institutions and venture capitalists and plans to launch a bid for the 891 Coral outlets in the middle of next month. Coral was put up for sale last month after the government's decision to block Ladbroke's pounds 363m takeover of the chain from brewing giant Bass on competition grounds.
Peter Mandelson, the Secretary of State for Trade and Industry, ordered the hotel and leisure group to sell the chain within six months and urged the company to look for a single buyer.
The Tote's decision to embark on a fund-raising exercise came after talks over a joint bid for Coral with rival Stanley Leisure were abandoned. Under the original plan, Stanley Leisure would bid for the whole of Coral and then sell around 100 shops to the Tote.
However, sources close to the Tote, the UK's fifth largest bookmaker, said that it had decided to boost its presence in the pounds 6bn-a-year betting market by buying the whole of Coral.
"We are in to buy Coral for Tote and we are happy that we have the money in place to buy the chain," they said. The acquisition of Coral would lead to a four-fold increase in the number of the Tote's shops from 240 to more than a 1,000.
Sources said the bid backers were a "pool of blue chip City institutions and venture capitalists groups". They revealed that the Tote had opted for City funding despite receiving a number of offers of support from wealthy racing punters. "There have been offers from friends of racing, but we did not want to be in a position where we depended on individuals," they said.
The DTI's decision triggered interest from a number of buyers, tipped to include Nikko, CVC, Charterhouse, NatWest Ventures and Nomura. Ladbroke is understood to have received up to 16 expressions of interest in Coral and is expected to send out the preliminary bid documents this weekend.
City analysts predict that Ladbroke, the UK's largest bookmaker, will not recoup the pounds 363m spent for Coral. They believe that the tight timetable for the sale and deteriorating market conditions mean the bid will be pitched at pounds 200 to pounds 300m. Ladbroke has been in talks with the Office of Fair Trading in an attempt to extend the sale's timetable, but experts believe that any relaxation of the terms set by the DTI is unlikely.
The bid for Coral comes at a crucial time for Tote. The government is reviewing the bookmaker's position and is expected to announce a partial privatisation by the end of the year. At present, the Tote's shops are controlled by the Home office and all its profits are ploughed back into racing.