Monday 23 May 2011

Betfred's Proposal for the Tote Delivers Long-Term Financial Backing for Racing

As the Government's decision in relation to the disposal of the Tote is imminent, Betfred is today announcing the principal terms of its offer. Betfred's proposal: ensures the Government has a complete exit from the Tote; secures value for the taxpayer; delivers support to the racing industry; and provides enhanced opportunities and security for the Tote's employees and other stakeholders. Betfred has been partially released from the non-disclosure undertakings it gave to Government in order to make this announcement.
Successful and Guaranteed Exit for Government and a Certain Future for the Tote
Betfred's proposal provides Government with a certain and total exit from its ownership of the Tote for a cash consideration. Betfred has fully funded financing provided primarily by its relationship banks and is ready to finalize and enter into binding documentation to acquire the Tote. After an extended period of uncertainty for the Tote, Betfred's acquisition will provide the stability needed to implement a long-term strategy and grow the business.
Significant Value for the Taxpayer
Betfred's proposal puts an enterprise value on the Tote of close to GBP200 million. This represents a substantial multiple of the Tote's FY11 EBITDA (after contribution to Racing) and a premium to the trading multiples of the UK's top two listed bookmakers.
Strong Support for Racing
Government has already pledged 50% of the net proceeds of the sale to Racing. Betfred supports this pledge and under our offer, that 50% represents significant value to Racing. Together with the proposals for the Tote contribution to racing, Betfred believes its offer will be worth over GBP120 million to Racing over the next seven years.
In order to ensure a smooth transition for Racing, and as a demonstration of good faith, Betfred will guarantee payments to Racing for FY12 with an aggregate value of GBP11 million.
Going forward, Betfred proposes placing the contribution to Racing on a more formal, certain and transparent basis than is presently the case and intends to enter into commercial arrangements with racecourses and others. Betfred expects a contribution of a minimum of GBP9 million per annum with a real opportunity for Racing to grow that amount by working with Betfred to grow Totepool and by performing under the new commercial arrangements.
Under the commercial agreements, the services that Racing currently provides to Totepool, such as sponsorship, marketing and provision of accommodation on racecourses would continue. The performance criteria to which the payments would be linked would include:

    - the number of race meetings going ahead as scheduled;
    - field sizes and quality; and
    - pool turnover from individual racecourses.
    Following the acquisition, Betfred intends to:

- develop Totepool's relationship with Racing into a highly successful partnership; and
- deliver more investment and real growth in Totepool than ever before.
Betfred is also very aware of the co-mingling and international opportunities relating to Totepool and is determined to exploit these more effectively to the benefit of Racing as well as the enlarged group.
Betfred aspires to grow Totepool into the world's leading pools business in partnership with Racing.
Attractive Long-Term Deal for Employees and Pensioners
Betfred has a forty year history of creating jobs and its goal is to grow the combined Betfred/Tote business, offering attractive long-term opportunities for the employees of both companies. Betfred sees the proximity of the headquarters in Warrington andWigan, and its long-term knowledge of, and relationship with the Tote, as being significant advantages in bringing the two businesses together quickly and successfully. The combination of Betfred's marketing expertise and the unique pools betting product will provide a focus for the enlarged group's energies.
Betfred has agreed terms with the trustees of the Tote's pension scheme and has received clearance from the Pensions Regulator for a substantial financial package to cover the loss of the implied covenant of Government.
Commenting on Betfred's proposal, Fred Done, Executive Chairman, said:
"Betfred is the best possible business partner for Racing as it is best placed to unlock the value of the Tote. The UK has the greatest horseracing in the world and we want the sport to thrive - that's why our bid contains a strong commitment to Racing.
We have a forty year track record of delivering growth and creating jobs. We want to buy the Tote because we want to grow and develop all of its component parts; and, in the long term, I believe the pool business will be the most important of those.
We have designed our offer to meet all the criteria Government has laid out. Our offer is fully financed and we have everything needed to conclude a transaction now."
SOURCE Betfred