The Tote was established by Act of Parliament in 1928 and Tote Investors Ltd (TIL) was founded in 1930 as an independent company by a ‘group of gentlemen interested in the welfare of racing.’ The welfare of racing was one of the reasons that the UK Government was committed to selling the Tote, which purchased TIL in 1962, to a racing trust for a nominal price of £150 million (US$282.4 million). Prior to legislation in 2004, taking it into public ownership, the tote was not legally owned by anyone or any body.

When the European Commission decided this was illegal state aid, an independent valuation was undertaken and a new asking price of £400 million (US$753 million) set. The racing consortium expected to buy the Tote then found itself with problems financing the deal. The consortium has now reportedly made an offer, but one that is below the valuation. Racecourse owner Arena Leisure, Racecourse Holdings Trust (part of the Jockey Club) and Racecourse Owners Association make up the consortium.

If the offer is too low then the Tote could find its way onto the open market where it would be of interest to private equity companies. Ladbrokes and William Hill are unlikely to make bids because of competition laws. Ladbrokes presently owns 1,900 bookmaking shops in Britain and William Hill has 2,100. If Gala Coral bought the Tote it would then have around 1,900 shops, bringing it about level with its competitors.

Following a presentation to Parliament on 11 July, 2006 Tote Chairman Peter Jones said, “It has been a difficult year’s trading for the industry as a whole and the Tote has performed in line with the competition. This is all the more pleasing as we still have to cope with the distractions of the sale of the Tote as well as restrictions on diversification into fast growing markets such as poker. Although Europe has effectively rejected the government’s original plan to sell the Tote to racing we remain focused on finding a way on delivering the Tote to racing and I am hopeful that this will be achieved over the next twelve months.”

Chief Executive Trevor Beaumont said, “The pools operation is being supported strongly by developing new systems and international partnerships, all of which are making it an attractive business increasing pool sizes with overseas money and delivering great returns to our customers. The internet business has delivered good results. We expect much more from this channel in the future as we migrate onto a new platform to allow expansion of the gaming opportunities on offer post privatisation. To summarise, we have created the right environment, team and focus to allow us to look forward with confidence to the future under new ownership.”

Supporting racing continues to be a key part of the Tote’s role. For the year to 31 March 2006, it delivered £7.8 million (US$14.7 million) of levy, up from £5.8 million (US$10.9 million) in 2005, and £10.7 million (US$20.1 million) in contributions to racing. The Tote saw a growth in estate from 462 shops to 540 and its FOBTs saw turnover growth of 30.9% to £1,162 million (US$2.2 billion). In contrast, racecourse turnover was hit by lower attendances. Group operating profit saw a 3.3% fall to £23.4 million (US$44 million) due to a combination of poor horseracing results and cost increases arising from extended opening hours as well as previous investments in infrastructure such as disaster recovery and refreshing legacy systems.

In 2003 it was decided that the tote’s exclusive licence to run pool betting on horseracing, formerly held in perpetuity, would be terminated and replaced by a new 7 year exclusive licence. At the end of the 7 years other betting operations will be free to compete with the tote in offering pool betting on horseracing in Britain. Winston Churchill instigated the setting up of the Tote as a safe place for the public to bet on horse races, beyond the reach of illegal bookmakers. (E-09.18.06)

© Copyright 2006 CasinoCompendium



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