Betfred readies South Africa entry with £40m Phumelela offer

Betfred has submitted an offer to buy all assets belonging to South African horseracing operator Phumelela in a multi-million-pound loan-plus-cash deal.

The total purchase amount has been set at between £39.3m and £41.5m, while Betfred will loan Phumelela £29.2m to repay 100% of its owed creditors.

The loan will be payable in two tranches, firstly an £11.2m advance paid within five days of Phumelela’s creditors approving the offer, with the remaining £20.1m to be paid by 15 November.

“Betfred’s involvement in Phumelela, horseracing and betting in South Africa, is likely to improve the industry, secure and create jobs and ensure valuable skills transfer and development,” the offer states.

The offer was made through Betfred holding company Lightcatch Limited.

As collateral for completion of the deal, Betfred has said it will release 20 million of its shares in UK bookmaker William Hill to Phumelela, representing a total value of £32m.

Betfred also suggested all business and staff jobs would be maintained following the acquisition.

“The continued involvement of key Phumelela management team members is a major factor in our assessment of an offer and the structuring of the proposed transaction,” Betfred said.

“We welcome further discussions with the management team on how best to maintain their position within the Betfred group following the proposed transaction.

“We don’t intend our operation of Phumelela to be divisive and we intend to operate with indigenous partners and a collegiate approach,” the bookmaker added.

Betfred first engaged the services of global consultancy firm FTI Consulting with a view to submitting an offer in June, before beginning discussions with Phumelela’s main administrator in July.

In the offer submission, Betfred stressed its superiority over a rival bid by Mary Oppenheimer Daughters (Pty) Limited, a firm owned by the daughters of South African industrialist Harry Oppenheimer.

The privately owned bookmaker referenced its own offer as providing Phumelela with more immediate financial support to boost its flagging operational revenue, highlighting that all creditors would be paid and that its loan would be paid in full more than a year ahead of the rival bidder.

The firm has also cited its “mutually fruitful” relationship with Phumelela when it previously operated the UK Tote as an indicator of the benefits of accepting its offer.

Betfred contended the offer represented a “vote of confidence” in the South African economy, and a direct response to the pledge by the country’s president, Cyril Ramaphosa, to boost the country’s finances by securing $100bn in foreign investment by 2023.

“The investment by an experienced multinational corporation into South Africa is likely to result in enhanced growth and opportunities for South Africa, as well as the transfer of skills and knowledge to local employees,” Betfred said.

“This investment should not only be beneficial to Phumelela’s creditors and other stakeholders, but also to horseracing and betting and the South African society in general,” the bookmaker concluded.

Phumelela has been given until 1 September to accept or reject Betfred’s offer.

Read more about the South African gambling market and its regulations here.