The owners of Camelot, the National Lottery operator, have given potential bidders for the business about two weeks to table their opening offers.

The auction could result in Sir Richard Branson, who lost out in his bid to operate the National Lottery several times, taking over the company. Other potential bidders include private equity houses and overseas lottery operators.

In April, four of Camelot’s five shareholders — Thales, Fujitsu, Cadbury and De La Rue — appointed Greenhill and NM Rothschild, the investment banks, to sell their stakes in the business.

A fifth shareholder, Royal Mail, is not part of the sale process, at present, but it could decide at the end of the auction to sell its stake to a winning bidder.

All five shareholders own equal 20 per cent stakes in Camelot.

It is believed that Sir Richard, head of the Virgin Group, has sounded out leading charities since the summer to discuss whether they would team up with him to make a bid.

Camelot makes an annual profit of about £30 million. The sale of 80 per cent of the business could fetch as much as £250 million.

It is thought that the valuation reflects the long-term value of the profits available, with insiders having dismissed as unrealistic talk that the lottery franchise could be worth as much as £350 million.

Apart from Sir Richard, other bidders linked with the auction include Sugal & Damani, the Indian lottery giant that bid for the UK lottery licence two years ago.

Cadbury, the confectionery group, and Thales, the French defence and electronics company, are thought to be most aggressively seeking a sale. Cadbury is the subject of a £10.2 billion takeover bid by Kraft, the American food group.

Camelot has long stuck to the once-controversial principle that it is a profit-seeking operator. It has fought off two challenges in the past from non-profit bids fronted by Sir Richard’s People’s Lottery.

Tensions around whether the operator makes money have eased in recent years, with Sir Richard refusing to participate in the third licence round.

Eighty per cent of Camelot’s income over ten years is believed to be worth about £280 million. Buyers are likely to offer less than that amount to ensure that they leave a profit for themselves.

The possibility of operators receiving extra cash derives from any value placed on the possibility that the lottery franchise could be extended for another five years.

As part of their bid for the licence, the shareholders agreed with the National Lottery Commission to cut costs from 5 per cent of turnover to 4 per cent and reduce profits from 0.5 per cent to between 0.3 and 0.4 per cent. This agreement was introduced the last time that the operator’s licence was renewed in August 2007.

Lottery ticket and scratchcard sales have risen, despite the recession. Any buyer would have to be approved by the commission.

The Government is thought to be monitoring the situation particularly closely because of Camelot’s promise that it will provide £2.2 billion for the 2012 Olympic Games in London.

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