Punter’s friend could fall in sell-off gamble

Now that the 320m racing consortium bid for the Tote has run out of puff, the rival Gala Coral contender is beginning to look a racing certainty at the finishing post. Can anything stop it? And, if not pipped, what will happen to the Tote as a result? First let’s look at the racing form and the field. At the last election, the Government pledged to sell the Tote, with its national spread of 540 betting shops, to the racing industry. Set up in 1928 by Act of Parliament, the Tote aims to provide a punter’s alternative to on-course betting with bookies (it also owns an exclusive on-course pool betting licence), while at the same time recycling its profits into the racing industry.

Quite apart from being a bit of an embarrassing ideological anachronism – as a state-run business in the post-Thatcher era – the Tote has attracted plenty of more practical criticism. Most of it concerns its alleged inefficiency as a business and the (not unrelated) thicket of regulation it has to deal with.

So, what a cracking idea to hand the whole problem back to the racing industry and make a little money for the Treasury at the same time. The trouble is, the Government is bound, by the EU, to sell the Tote at a fair price, which most objective observers reckon at about 400m. And what the racing consortium (to all intents and purposes consisting of racecourse operators) has come up with falls well short of that. Not to mention the fact that the bid money looks heavily borrowed – hardly a propitious omen for racing’s future stability.

What, then, are the alternatives? In an open auction, the most likely winner would be one of the big bookies – but the two largest, William Hill and Ladbrokes, are effectively excluded from a straightforward bid by competition laws.

Peter Jones, the racing guru and former adman who has headed the Tote since 1997, seems set on a "third way" between an out-and-out commercial solution and the heavy regulation that currently dogs the Tote. But his idea of a broader consortium – to include owners and trainers, though fair-minded , sounds financially cumbersome and difficult to manage. There is also the brutal break-up option: hand the racing consortium the racecourse pool betting licence and sell the betting shops on the open market. Yet this is politically unsophisticated and could engender a lot of criticism.

Enter Gala Coral, the one national bookie that would not precipitate a competition inquiry if it took the Tote over lock ,stock and barrel. Spookily enough, it already seems to have put its bid together – and the price is a great deal more commercially attractive than that of the racing consortium. But, though the finishing post may be in sight, there are still one or two things that could trip a Gala Coral bid up.

Such an overtly commercial solution (Gala Coral is basically interested in getting its hands on the Tote betting shops) risks alienating the racing industry. Also bad for headlines would be the job cuts likely to ensue (not least in the Tote’s capacious marketing department); and the probable disappearance of the Tote brand.

Quite a gamble, in fact, for all involved.

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