Debt difficulties mean Gala Coral, favourites to buy the Tote, will bid for the acquisition through Toteco, a ring-fenced investment vehicle backed with £150 million equity provided by Gala Coral’s private equity owners Candover, Cinven and Permira.
The remainder of the £400 million price tag the government has put on the Tote would be financed with £180 million worth of debt and £70 million of finance raised from other sources.
CEO Neil Goulden indicated that should Gala Coral be successful in its acquisition bid, the Tote’s chain of 540 retail betting shops would be rebranded and managed by Coral on a fee-paying basis. Goulden outlined that the Tote’s pool betting operation was not of interest to the gaming and betting group. ‘Emotionally, it belongs to racing and we’re talking to people about how to do that,’ he said. Discussions have taken place with football pools operator Sportech and lottery and pari-mutuel betting group Scientific Games to take over the Tote pool betting business.
Coral competitor BetFred and Irish bookmakers Paddy Power and Boylesports have also been named as possible suitors for the Tote’s chain of betting shops and online business.
Meanwhile, the Financial Times reported Goldman Sachs has been retained by the British government to handle the open auction. The US investment bank is expected to advise government on whether selling the business in its entirety or breaking it up is the most lucrative sale option. Given that recent economic conditions have cut the Tote’s perceived value to £200-300 million, Goldman Sachs might even advise the government to hold off the sale completely until credit markets improve.
The sale on the open market is further complicated by government promises to return 50% of the profits of the sale to the British horse racing industry. European regulators will need to be persuaded that this action does not represent state aid.
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