THE Grand National has a reputation for being one of the most gruelling of horse races, but those who have spent the past few years trying to hammer out a deal to buy the Tote, the state-owned bookmaking operation, think the talks have proved about the most arduous task the sport of kings has to offer.

“It just drags on and on,” noted one insider. And, like most of those involved, he wants to see some kind of resolution soon.

They may get their wish. The government is expected in the next few weeks to reject formally the £320m offer made in September by a consortium comprising racing interests such as the Racecourse Association (RCA), the management of the Tote and LDC, the private-equity arm of Lloyds TSB. An announcement on how the government intends to proceed instead is likely around the same time. Many experts believe that it will put the Tote up for auction, with a sale process likely to start in the autumn when, it is hoped, the credit crisis will be over.

A number of prospective buyers are starting to declare their hands, with the likes of Gala Coral, the gaming group, and Andy Stewart, racehorse owner and founder of Cenkos, the stockbroker, having gone public with their interest.

Although a privatisation was first mooted in the 1980s, the Tote saga proper has been running since 2001, when the government made a manifesto pledge to sell the operation, which has about 500 betting shops and an exclusive licence to run pool betting in the UK. Last year it made a profit of £29m and handed £20m back to racing. The government pledged that it would be sold to the “benefit” of the sport.

Attempts to fulfil that commitment have proved anything but straightforward. The Department for Culture, Media and Sport, which is responsible for the Tote, found it could not hand the business to the racing industry in a sweetheart deal because this would breach European rules on state aid. It hired Price Waterhouse Coopers, the accountant, to value the business, and was informed the bookmaker could fetch £400m.

An initial offer by the racing consortium, thought to be at around that £400m asking price, caused concerns within the Treasury over the bid’s structure. Several months later, after the credit crunch kicked in, a revised, lower offer was submitted. While the culture department has yet to reject it formally, consortium insiders believe the game is up. “The bid hasn’t been accepted so an auction is the most likely outcome,” said one.

It is hardly surprising that the consortium cannot get to the £400m the government is seeking. This figure is said to include a premium that a trade rival would be able to afford from cost savings made by merging the Tote with an existing bookmaker. With no such synergies, a £400m price tag would not be viable for the consortium.

Despite this hurdle, there is nothing to prevent the racing consortium from participating in an auction. The question is who it will have to outgun to win. “There are enough people around who are interested to have a proper auction,” said one person close to the action.

Neil Goulden, chief executive of Gala Coral, this weekend reiterated his desire to bid. “Our position has not changed. We will take a look at the numbers and we would want to put in a bid,” he said, adding that any offer would depend on the finances of the Tote and any conditions attached to a sale, such as having to guarantee jobs at the Tote’s Wigan headquarters.

It is understood that Gala Coral has financing in place for a deal. Goulden also welcomed the possibility of a joint bid with the racing consortium, saying he would be happy to sit down with the racing industry and government to see if something could be negotiated.

While Ladbrokes and William Hill would most likely be prevented from buying the Tote on competition grounds, there are other bookies who are interested. Fred Done, boss of the BetFred chain, Britain’s fourth-biggest operator of betting shops, publicly declared his interest. He said: “I’d like to look at the figures. It would dovetail with this business very well. I don’t think we’d have a problem with financing. I have venture-capital firms banging my door down. [I would prefer] to use our banks. If we could put the right case to them, money won’t be a problem.” Combining the two would create a business with about 1,300 shops.

Last weekend, Cenkos’s Stewart was reported to have declared his interest in buying the Tote and floating it on the Alternative Investment Market (AIM), leaving the government with a sizeable stake. But he estimated that the operation is worth £260m, a figure that may not cut much mustard with the Treasury.

Private-equity houses may also want to bid and there would probably be significant overseas interest, particularly from organisations already involved in pool betting. Analysts said these could include Scientific Games, an American company, and Casinos Austria.

At one stage, it looked as if overseas operators were going to help finance the racing consortium’s offer, but this was met with resistance from the government on the basis that it was trying to negotiate a sale to British racing. But in an open auction, it is thought an overseas bidder would be free to make an offer.

If the Tote is sold to anyone other than the consortium, half the proceeds will be handed back to the sport, with the other half filling the Treasury’s coffers.

It is this prospect that will no doubt be focusing government minds and could lead what has been something of an endurance race to a much-welcomed conclusion.

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