Tote raises finance for £400m buyout

Lloyds TSB has agreed to provide the financing for a £405m joint bid for the Tote by management and a racing consortium, it emerged yesterday.

The bank is understood to be prepared to underwrite debt of more than £350m for the bid, which has to be tabled by 26 January under a Government-imposed deadline.

The Tote management, led by its chief executive Trevor Beaumont, yesterday put proposals for a heavily debt-backed bid to senior members of the racing consortium, which includes Jockey Club Racecourses, whose tracks include Cheltenham and Newmarket, the Racehorse Owners Association and the Racecourses Association.

While the consortium members were initially wary of a heavily debt-backed bid - fearing it could jeopardise the £10.7m dividend the Tote paid to racing last year - they are now understood to be warming to the plans.

Backing from a blue chip bank like Lloyds TSB has given the proposals added credibility. However, industry sources cautioned last night that there still remained "considerable work to be done" and that the proposals would need to undergo due diligence before getting the final go-ahead.

The Government made a manifesto commitment to sell the Tote to horseracing but the sales process has been dogged by difficulties and delays.

An initial attempt to sell to a racing trust for a knockdown price was ruled unlawful by the European Commission on the grounds that it violated rules banning "state aid" to industry.

A second bid by the consortium was then rejected as too low, prompting the withdrawal of Arena Leisure, which hosts a quarter of British racing fixtures.

The current proposal won the backing of Richard Caborn, the sports minister, who ruled out the consortium's plans to help fund a bid that would meet the £405m valuation put on the Tote by PricewaterhouseCoopers with the aid of a foreign betting company.

The two sides were told to work the proposals into a firm bid by the 26 January deadline.

The Tote's staff are expected to be offered a stake in the operation as part of the bid. The Tote currently has a seven-year monopoly on the provision of "pool" betting in Britain and operates the popular "Scoop 6" accumulator bet which requires punters to back the winners of six televised races on a Saturday.

The sell-off of the Tote has also attracted interest from Gala Coral, which tabled a bid of £325m for the bookmaker's chain of 540 betting shops. That would have enabled the consortium to buy the Tote's pool, telephone and internet businesses for as little as £80m.

However, the Coral bid has so far been ruled out by the Government, because of the manifesto commitment to sell to racing. Ministers have also been facing pressure from MPs in north-west England who fear that a Coral bid would lead to job cuts in Wigan, where the Tote is based.

They are more supportive of the management/racing proposals because it would preserve those jobs.

Coral has taken a back seat since tabling its offer, but is understood to be keeping a close watch on developments and would be poised to swoop in the event of any last minute hitches.