The Government will formally end protracted negotiations today over a £320 million sale of the Tote to a racing industry consortium, paving the way for an open auction of the state-controlled bookmaker and pool betting operator.

The announcement, which comes more a decade since privatisation was first mooted, will force the Government to break a 2001 manifesto pledge to sell the Tote to racing, although it is expected to argue that it gave the industry every opportunity to do a deal.

A small number of potential suitors have already declared their interest, including Gala Coral, the privately owned gambling operator, and Andy Stewart, the racehorse-owning founder of Cenkos, the stockbroker. A spokesman for Gala Coral last night reiterated its interest in the business.

Industry sources believe that today’s announcement by Gerry Sutcliffe, the Sports Minister, will refer to plans to appoint fresh advisers to investigate strategic options for the business, which could include a decision to retain the business on a short-term basis.

However, analysts believe that an open auction is the likeliest outcome, and that retaining the Tote after so many years spent selling it would provoke derision. One analyst said last night: “The Government could decide to wait until later in the year in the hope that debt markets improve, but a sale – sooner rather than later – is inevitable.” The Government’s attempts to off-load the Tote to the benefit of racing have been fraught with problems. An early attempt to do a sweetheart deal with racing was blocked by the European Commission on the ground that the knockdown price being mooted was tantamount to state aid.

After the ruling, the Government asked PricewaterhouseCoopers to value the business and negotiations over an estimated £400 million deal were started with the industry. Several attempts later, including one involving funding from Lloyds TSB’s private equity arm, the racing industry came back in September last year with a £320 million offer. The consortium, which included Tote management, was led by the Racecourse Association and the Racehorse Owners Association. However, its ability to raise the funding necessary to satisfy the Government’s price expectations was affected by the credit crunch.

The Tote, formally known as the Horserace Totalisator Board, runs 540 high street betting shops and 59 kiosks on racecourses and has an exclusive licence to run pool betting in the UK.

Last year, it reported a 13.6 per cent rise in operating profits to £29 million and handed £20 million back to the racing industry. Group turnover rose 12.1 per cent to £2.48 billion, and the internet division increased gross profits by 45 per cent. The group has more than 4,000 employees.

Whereas Ladbrokes and William Hill, each of which has about 2,300 shops in the UK, would almost certainly be prevented from bidding on competition grounds, Gala Coral has only 1,550 shops and has been public over its ambitions to close the gap on its bigger rivals.

Fred Done, founder of the Betfred chain, has also expressed an interest in looking at the Tote, although Paddy Power, the Irish bookmaker, this week ruled itself out of the running in order to focus on expanding its existing estate of 58 shops in London and opening shops for the first time in Manchester and Glasgow.

More than 74 million bets are placed with the Tote every year, although in recent years the ageing technology at its on-course kiosks has attracted criticism from both its staff and punters.

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