After failing to reach an agreement with the horse racing industry over buying Tote the government will now opt for an auction instread.
The government is set to outline an auction process after negotiations broke down with the Racecourse Association (RCA), management and LDC, the private equity arm of Lloyds TSB. Rumour suggests that the government was unhappy over the level of involvement of LDC and the price, which the consortium was offering, reckoned to be close to £400m.
This was roughly the price tag that consultants PWC came up with when they were commissioned by the government to value the business. There were earlier suggestions that the business should be floated on AIM, but that was ruled out on the basis that Tote may only have a market capitalisation of £260m due to sluggish equity markets. The government’s move is likely to open up the arena to a long list of other potential bidders such as betting groups Gala Coral, Paddy Power and BetFred. However, large betting groups with already extensive networks of betting shops such as William Hill and Ladbrokes may be barred from bidding. Lottery infrastructure companies such as Scientific Games, Intralot, Opap or Lottomatica could be interested as well. The privatisation of Tote has been a long running political saga dating back to the 1980s.