Racing syndicate gambles on £130m Tote stake

A consortium of racing industry heavyweights has clinched a deal to buy a stake in the Tote, paving the way for a full takeover of one of the betting industry’s best-known brands within five years.

Sky News has learnt that Alizeti Capital handed over roughly £20m to Betfred, the gambling group run by Fred Done, as an up-front payment on Monday in return for a minority stake in the Tote.

The transaction is the first stage of an ambitious plan drawn up by Alizeti, a vehicle headed by former Merrill Lynch trader Alex Frost, to transform the Tote’s profile and financial performance even as it relinquishes the on-course pool-betting monopoly it has enjoyed for years.
Sources said that part of Mr Frost’s bold plan for the business included the £20m acquisition of Rewards for Racing (R4R), a loyalty programme for the horseracing industry which partners with Bet365, Betfred, Coral and Betfair.
That deal is aimed at giving the new-look Tote access to a membership scheme with roughly 900,000 members and which can be built through more effective use of data.
Talks between Alizeti and Betfred about an agreement valuing the Tote at just over £130m have been taking place for several months.
One source close to the deal said Alizeti had been aiming to raise £65m from a group of investors in return for a 65% stake in itself.
Its new backers are said to include many of the industry’s most prominent names.
Its pitch to prospective shareholders referred to a three-to-five year partnership between Alizeti and Betfred, during which the former would own 25% of the Tote’s business-to-business operation and a 75% stake in its digital and on-course consumer betting division.
“At the end of the partnership Alizeti Capital will buy out Betfred’s remaining equity stakes according to a clearly defined formula,” a racing industry figure who has agreed to back the deal said.
Mr Frost’s investment underlines his belief that the Tote has a vibrant future despite its impending removal from the majority of British racecourses in July.
A £20m sum is said to have been earmarked by his consortium to invest in new technology and marketing the Tote brand.
Under the £265m deal that saw Betfred take control of the Tote in 2011, it was granted a seven-year monopoly on pool betting‎.
Alizeti’s investment, which is expected to be announced later this week, marks another chapter in the 90-year history of the Tote.

The organisation was set up partly at the instigation of Winston Churchill, who at the time was a racehorse-owning Chancellor of the Exchequer.
‎It remained government-owned until Mr Done persuaded ministers to sell it to him in 2011.‎
The expiry of Betfred’s exclusive pool-betting licence has sparked a row over the future of on-course gambling, with most racecourses including Aintree, Cheltenham, Goodwood and York ‎planning to launch Britbet, a new pools product.‎
Mr Done responded to their proposal by announcing the closure of Betfred’s 50 on-course betting‎ shops and the termination of race sponsorships inherited from the Tote.
‎Only a small handful of tracks, including Ascot and Chelmsford, which is owned by Betfred, have opted not to join their peers in the new pool-betting service.‎
Both Mr Done and Alizeti’s backers are said to be sceptical about the launch of Britbet, believing it will not enjoy the Tote’s deep liquidity.‎
Mr Frost’s group also includes Eamon Wilmott, the chairman of Total Performance Data, a provider of technology used in horseracing around the world.
Mr Wilmott, who was on the board of the British Horseracing Authority until last November, is expected to become the Tote’s chairman‎.
According to one forecast referred to by Alizeti, a successful transformation of the Tote could create a business boasting £65m of earnings before interest, tax, depreciation and amortisation by the end of the sixth year under the new ownership structure.
That would mark a more-than-sixfold increase on the Tote’s current EBITDA figure.