Betfred get Tote rebate of £32m after an early payment clause allowed them to reduce the original bill of £265m to £233m

The Mail Online has revealed that the UK bookmaker Betfred managed to acquire the Government-owned Tote for a mind boggling £32m cheaper than was originally thought to be the case.

The process to acquire the seven-year license to operate the Tote began in Nov 2010 and ended when Fred Done and his team were awarded the contract in June 2011.

The fee was said to be £265m with £90m going towards horse racing and £90m being returned to the taxpayer. Additionally, Betfred would commit to paying the racing industry £11m up to March 2012 and payments of £9m per year for the next six years. The Tote’s 517 Retail outlets were rebranded in Betfred livery and they were soon managing the pool betting at 60 UK racecourses.

The story claims that Betfred actually paid £233m after cutting a deal with the government for paying the fee early, saving £25m in scheduled interest payments, and earning a £7m early-payment rebate.

A spokesperson for the Department for Culture, Media & Sport (DCMS) told the Mail Online: “The sale of the Tote to Betfred was about getting the best possible deal for racing. The Government has begun discussions with racing on the arrangements for paying their final share of the net proceeds, after Betfred’s early completed payment on the deal.’

Betfred’s main rivals at the time of the tender were Sport Investment Partners, a consortium led by the former Chairman of Liverpool FC Sir Martin Broughton. Speaking from the Cheltenham Festival Broughton said: “I feel aggrieved because I’ve always considered we had the best bid.”

The current license for the Tote ends in 2018 but as Fred Done said at the time of the initial announcement, “there’s no reason why this can’t go on forever.”

Ladbrokes to buy Tote?

Despite Ladbrokes being reported as struggling on the London Stock Exchange in recent weeks, there is hope on the horizon for worried investors. The bookmakers are reportedly looking into buying the Government owned bookmakers, Tote.

There have been many previous attempts to sell the tote in the past, however further attempts to sell the business were put on the back burner in October 2008 due to the declining economic environment.

Recently talks of selling the tote have rekindled once again with Ladbrokes being just one of the big named gambling companies looking into buying the currently nationalized company.

William Hill who has regained their stock price lead above Ladbrokes is another company looking into a deal. William Hill has already moved their online operations out of the UK along with Ladbrokes. More companies looking into buying tote include Paddy Power and the Gala Coral group.
The consolidation of the online gaming industry has been a priority in the last few months for some companies as many of the larger players are buying out smaller competitors.

UK Government Delays Tote Sale As Recession Looms

The UK government announced yesterday that it will not proceed with the open market sale of the state-owned Tote this autumn due to current market conditions. Sports Minister Gerry Sutcliffe said the Tote would be brought to market 'when conditions are likely to deliver value for the taxpayer and the racing industry'.

In a written statement to Parliament, Mr Sutcliffe said it was not appropriate to pursue a sale of the Tote in the current market conditions, and had decided that the Tote should remain in public ownership for the medium-term.

Mr Sutcliffe said: “It is right that the Tote is now given time to grow the business so that any future sale will achieve maximum value. In particular, I would expect the Tote and racing to continue to work closely together for the benefit of the sport and the punter.”

"The government would like to place on record again its warm appreciation of the loyalty and dedication of the Tote’s staff whilst its future has been under consideration,” he added.

The government had previously attempted to sell the Tote to a racing trust in 2005 until it became clear that a sale on that basis risked being denied approval under European state aid and competition rules, as the sale would have been below open market value.

Earlier this year the government confirmed that talks with a racing industry consortium had ended due to the bid not meeting the Tote's market value of £400 million, as set by independent consultants Pricewaterhouse Coopers.

With more than 4,000 employees, over 540 shops and a major presence on the 59 racecourses in Britain, potential suitors for the state-owned bookmaker are thought to include The New Football Pools operator Sportech plc, Gala Coral, Betfred, and Paddy Power plc.

Mr Sutcliffe reaffirmed the government's view that it should remove itself from detailed involvement in the affairs of the racing and bookmaking industries.