This article was produced by Olswang LLP, which joined with CMS on 1 May 2017.
According to reports, the Tote is to be put up for sale on the open market after the Government finally rejected a takeover bid by a racing consortium.
In our update at the end of April (click here
) we reported that the bid made by a racing consortium to buy the Tote appeared to be in trouble following reports that the consortium members had fallen out with each other and that the Treasury had rejected the bid as too highly leveraged.
Since then the "credit crunch" has led to the consortium reducing its bid, which is now reported to be approximately £320 million. It has also been reported that PriceWaterhouseCoopers, which has been advising the DCMS, has recommended that the Government should not accept the consortium's revised lower bid (PWC's valuation of the Tote being approximately £400 million).
In a horseracing debate in Parliament on 21 November, Gerry Sutcliffe, the new Minister for Sport, said that if the Government does not sell the Tote to racing and it is sold on the open market, 50% of the sale proceeds would go to the horseracing industry. This was the first time that an open market sale had been publicly considered and was followed by reports on 16 December that the Government had decided that such a sale should go ahead with an auction process that could last up to nine months. However, these reports remain unconfirmed at the time of writing.
Gala Coral's £400 million plus bid is said to be still on the table, although their business has been harmed by the smoking ban reducing the number of visitors to their bingo clubs. Ladbrokes and Hills would be precluded, for competition reasons, from acquiring the Tote's betting shop estates and private equity's appetite will also have diminished with the tightening of credit.
If the Government does sell the Tote on the open market, perhaps it might see the £200 million or so that it has now committed to hand over to racing as compensation for abolishing the Levy (the continuation of which has again been cast in doubt)?