Betfred's Offer for the Tote Delivers GBP45m More for Racing

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May 23, 2011, 10:37 ET

LONDON, May 23, 2011 /PRNewswire/ -- Further details of SIP's bid, which have yet to be made fully public outside the Racing industry, have emerged which suggest a value gap to Racing of over GBP45m over seven years. This reinforces Betfred's long-held belief in the greater value its bid gives both to Government and to the Racing industry.

Betfred understands that this weekend SIP was continuing to approach potential investors to seek support for its proposal. In a widely distributed investment memorandum, SIP outlines various details which we believe raise a number of serious questions on the value and deliverability of SIP's offer to Racing versus that of Betfred's.

Commercial payments to Racing

It is understood that SIP is proposing "GBP7m per annum for commercial arrangements with racecourses." This compares with Betfred's GBP11m in the first year and GBP9m for years two to seven, to the end of the exclusive licence. Over the life of the contract, Betfred provides Racing an additional GBP16m.

Charitable payments to Racing

It is understood that SIP is offering a further annual "GBP4m for Racing charitable ends." This annual charitable commitment is grossed up by SIP using a "multiple of 23x". Betfred questions how this multiple has been arrived at. SIP's charitable donation replaces the 50% of net proceeds to Government. This compares to Betfred, where the industry receives an amount of GBP57.5m. Over the seven years of the licence this represents an additional amount of GBP29.5m from Betfred.

Partnership with Racing: Tote Racing Development Board

This weekend, Betfred confirmed that it is in discussion with racecourse groups on the creation of a new Tote Racing Development Board. Chaired by Barry Nightingale, CFO of Betfred, the Board will comprise senior executives from the major racecourse groups, an elected representative for the independent courses and the Director of Racing at the Tote, a post to be created by Betfred on completion of the Bid. It will meet at least quarterly, will set the agenda for the development of the Tote Racecourse Partnership and be key to decision making, growth and the commercialisation of the Tote in the UK and internationally.

Certainty of funding and deliverability

Betfred's offer is fully underwritten, principally by relationship banks, and Betfred is ready to sign a transaction now. Betfred will be long term custodians of the Tote and strong commercial partners to Racing. SIP has previously indicated that its deal would be all equity and would not involve Private Equity. The SIP memorandum indicates its intention to put in place or roll over "GBP50m debt" and, last week, it announced the involvement of Private Equity firm Oakley Capital.

Barry Nightingale, Betfred CFO said:

"From our understanding of the numbers, we are disappointed not to receive the full support of the Racing community. By supporting SIP the industry is sacrificing GBP45m for board seats and 10% of the equity in a company with an uncertain ownership structure. Betfred will be long term custodians of the Tote and strong commercial partners to Racing. We continue to press our case to all in the industry and we are, today, having further constructive discussions directly with key figures in Racing."

Mark Pearson, [email protected]

SOURCE Betfred