Worth a gamble?

The Tote faces an uncertain future after the Government, which has pledged to off-load the state-owned betting firm, rejected a bid from within the industry. Now it could be sold to a private company, putting jobs at risk and alienating the racing fraternity. Robert Lester reports.

A question mark hangs over state-owned bookmaker the Tote – and the stewardship of current chairman and former ad man Peter Jones – after the Government turned down an offer for the business from a racing consortium at the end of last week. It now looks as if rival Gala Coral is in prime position to bid for the Tote, casting doubt on the future of the brand and its 300 staff.

Labour made a manifesto pledge before the last general election to sell the Tote, which has 540 betting shops, to the racing industry. The consortium – which includes racecourse operator Arena Leisure; Racecourse Holdings Trust, the owner of 13 tracks including Aintree and Cheltenham; and the Racecourse Owners’ Association – was the Government’s preferred bidder, but it is understood to have offered less than 330m for the whole Tote business. That falls well short of the 400m valuation placed on the betting operator by accountants PricewaterhouseCoopers last month.

Market Valuation
The European Commission has ruled that the Government must sell the Tote at market value or risk breaking EU rules that outlaw state aid. Competition laws prevent William Hill and Ladbrokes, the two largest bookmakers in the UK, from making bids, opening the door for Gala Coral, a private company worth 4.25bn. Chief executive Neil Goulden has already admitted that the company is interested and all sides are now waiting for the Department for Culture, Media and Sport to decide whether to open up the sale to a full auction.

Such a move would be unpopular with many in racing because of the risk of job losses. They believe the interests of racing would be best served if the Tote was sold to the consortium, but Warwick Bartlett, a partner at Global Betting and Gaming Consultants, says/ “I don’t think that’s the case at all. The Tote is not a very well run business and the consortium is having to borrow huge amounts of money to buy it. In the long term they will probably end up selling the Tote back to the market to get themselves out of trouble. The Government would be better off just trying to get the best deal for the taxpayer.”

Bartlett claims Gala Coral has already submitted a bid that dwarfed the consortium’s offer for the Tote, which was established by an Act of Parliament in 1928. Its original purpose was to offer on-course pool betting on horseracing as an alternative to starting-price betting with bookmakers. Its profits are ploughed back into the horseracing industry.

As well as its betting shop estate, the Tote owns the exclusive licence for on-course pool betting and reported a turnover of 2.2bn last year. It is run by former Boase Massimi Pollitt (BMP) executive Jones, a colourful character who thinks privatising the Tote is a bad idea for racing that will only benefit the bookmakers.

He has been quoted as saying: “The Tote at the moment is far too constrained by Government and yet it wants to sell it off to bookmakers or private enterprise where there would be no constraint at all. How does that make sense?”

Industry Ownership
Jones is in favour of selling the Tote to a consortium that he says could also include owners and trainers, as well as racecourses. He thinks it could then be franchised to countries where there are no bookmakers, such as the US, France, South Africa and the Far East.

Another alternative would be to hand the racing consortium the pool betting licence and sell the betting shops on the open market. Should Gala Coral triumph in the race for the Tote, it would rival its two larger competitors with about 1,900 betting shops in Britain. William Hill has 2,100 shops and Ladbrokes owns 1,900. However, Gala Coral has to be careful not to alienate the racing community.

Whatever the outcome of the auction for the Tote, Bartlett thinks the betting industry will benefit in the long run. “To make it more profitable, the Government changed the Tote’s licence to make it a fixed-odds bookmaker,” he explains. “It is now competing with everybody else but because it is owned by the Government it has been allowed certain advantages over the free market. If the Tote is sold then it will go back to a level playing field.”

Peter Jones: From adland to Aintree
Tote chairman Peter Jones started his career in advertising in 1964. Within five years, he had helped found one of the country’s most famous agencies, Boase Massimi Pollitt (BMP), and was part of the team that created the Smash Martians campaign for Cadbury’s – voted the UK’s favourite ever ads in an ITV poll.

In 1977, Jones took time out from advertising to enter the world of publishing, founding Trainers Record, which was later sold as a database to the Racing Post. But he kept his non-executive position at BMP and returned to the fold in 1980 to help extract the agency from its unwanted Univas connections. He went on to become chief executive of the BMP group and subsequently Omnicom UK after it was created by the merger of BMP and the DDB Needham group.

Jones left Omnicom in 1997 and succeeded Lord Wyatt of Weeford as chairman of the Tote on August 1 that year. He is also chairman of Chariot, the parent of troubled online lottery operator Monday.

D&AD chief executive Michael Hockney, who spent 12 years at BMP from 1975 to 1987, says: “Peter is a man of many parts. He probably did have a departmental title at BMP but I can’t remember it. He was one of the founders and made a fantastic contribution, but without having a label attached to him. That’s a good description of Peter generally.

“He was a great strategist – very good on planning and very good on media strategy. But he was also a person with lots of entrepreneurial ideas. He has an imaginative mind, looked at problems from interesting angles and came up with interesting solutions. He’s very easy-going and charming, and great fun to be with.” Jones has been involved in racing since a first venture into racehorse ownership 30 years ago. In 1980, he gained a seat on the council of the Racehorse Owners Association and served as the body’s president from 1990 to 1993. He became one of the founding directors of the British Horseracing Board in 1993 and two years later joined the Tote board.

Hockney adds: “BMP always had a very strong connection with the horses. Peter and Martin [Boase, co-founder of the agency] were very keen on horseracing. We used to have outings to the races and Peter was always at the forefront of them. He has a photographic memory. BMP had a very strong professional, creative and intellectual culture, but alongside that it was also a very informal place where people were treated as equals. That is very much Peter’s style.”

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