City tycoon Spencer places bet on future of the Tote
The ICAP founder is buying a minority stake in one of Britain's most prominent betting companies, Sky News learns.
Tuesday 8 October 2019 12:32, UK
Michael Spencer, the billionaire financial services entrepreneur, is placing a big bet on the future of the Tote by snapping up a substantial minority stake in its parent company.
Sky News has learnt that the founder of ICAP, the interdealer broker that was sold in a later guise for almost £4bn last year, will take a 10% stake in the pool-betting operation as part of its purchase from Betfred.
The deal, which is expected to be concluded later this month, will add Mr Spencer's name to a string of prominent investors in one of Britain's most prominent gambling businesses.
His investment in the Tote's owner, which is understood to have cost Mr Spencer more than £10m, follows a series of investments in technology-led companies during the last year.
The City tycoon has backed businesses such as Elvie, a manufacturer of female health products, and Veridium, a biometric fintech company.
He is understood to view the Tote as a business which can be transformed through investment in data and technology.
Betfred, which bought the Tote from the government in 2011 for £265m, sold an initial stake to Alizeti Capital last year.
The sale of Betfred's remaining 75% shareholding to Alizeti is expected to pave the way for a relaunch of the Tote brand and an acceleration of its efforts to forge partnerships with overseas pool-betting operations.
In a sport riven by political conflicts, Alizeti has used the last year to build support for its vision for the future of the Tote - and, by extension, for horseracing in the UK.
Positioning itself under the umbrella of Together for the Tote, Alizeti comprises a group of racehorse owners and breeders, and has enlisted support from leading trainers and jockeys, such as John Gosden OBE and Frankie Dettori.
Last October, the Tote's owners announced a seven-year agreement with Britbet, which operates on-course betting activities at 55 of the UK's racecourses.
Under the deal, those racecourses will receive over £50m, with the Tote and Britbet combining to offer a single pool on races run there.
The Tote has a 4% share of the UK betting market, but believes it can substantially grow that by investing in new technology at a time when high street bookmakers are facing growing regulatory and financial pressures.
Alizeti, which is headed by former Merrill Lynch trader Alex Frost, wants to transform the Tote's profile and financial performance through a blueprint which has included the £20m acquisition of Rewards for Racing (R4R), a loyalty programme for the horseracing industry which partners with Bet365, Betfred, Coral and Betfair.
The Tote 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 sparked a row over the future of on-course gambling, with most racecourses including Aintree, Cheltenham, Goodwood and York drawing up plans last year to launch Britbet, a new pools product.
Fred Done, Betfred's founder, 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.
According to one forecast referred to by Alizeti in earlier investor presentations, 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.
An Alizeti spokeswoman said the consortium's purchase of Betfred's shares in the Tote was due to be completed shortly.