One of the major hallmarks of the betting industry over the past 20 years or so has been the sight of a number of the biggest players in the game joining forces. Large companies do, of course, swallow up smaller operators pretty frequently in the business world – not only in the gambling sector – but that is not the type of merger of which we are speaking here. For in the 21st century it has been the true behemoths of the betting business who have joined hand in hand to stride forward together. We are referring to the likes of Paddy Power and betting exchange titan Betfair jumping into bed together in 2016 and traditional high street giants Ladbrokes and Coral who tied the knot in a business sense later that same year.
Whilst the aforementioned betting unions continue to go from strength to strength, with all parties seeming to be in it for the long hall, occasionally the coming together of two punting institutions turns out to be more of a fleeting affair. And, in recent years, there has been no bigger example of this temporary liaison than the time that Betfred bought the Tote.
Admittedly, a seven-year relationship seems to be a fairly respectable innings in the modern era, but sure enough, the itch did set in with these two cornerstones of the British betting game who, having come together in 2011, began to set divorce proceedings in motion in 2018. Here we run through the events which brought these two betting entities together, what ultimately drove them apart, and how the pair emerged from the other side of the relationship. First things first though, a brief introduction to the key players in this game.
Who Are Betfred?
As one of the largest independent bookmakers in the world, Betfred likely need very little introduction to those with even a passing interest in gambling. The brand affectionately referred to as “The Bonus King” weren’t always so well-known though. The company – which boasted a total turnover of a whopping £10 billion in 2018/19 – began life as a single shop operation in Ordsall, Greater Manchester back in 1967.
Born out of the hard work and ambition of Salford brothers, Fred and Peter Done, Betfred in fact kept this family name for some time, being known as Done Bookmakers until as recently as 2004. Currently the UK’s fourth-biggest high street bookmaking brand, lying behind only William Hill, Ladbrokes and Coral, Betfred are also a major player in the online world, with offices in Warrington and Gibraltar and in the region of 10,000 employees. All in all, one of Britain’s greatest rags to riches business success stories.
Who Are the Tote?
Having been around since 1967, Betfred have now passed their 50th anniversary, but the Tote has been around for even longer than that. Beginning life in 1928, Britain’s premier pool betting operator is now in fact rapidly closing in on its centenary, and it has been quite a journey over its almost 100 years in existence.
Before we delve into the tale of the Tote, we should perhaps first pause to highlight what exactly we mean by “pool betting” and how it differs from betting with a traditional fixed odds bookmaker. The clues are really in the titles of each type of bet here. Fixed odds firms accept and pay out bets at odds that are “fixed” or set by the odds compilers. However, in pool betting, all stakes for a given event, a horse race, for example, are placed together in a pool. The pool betting operator will then take a cut from this pool as their profit, with the remaining pot being shared between all winners. Returns are then declared as a dividend, i.e. the amount that would be returned for a £1 stake – the higher the number of winners the lower the dividend, and vice versa.
How It All Started
Okay, so that is how it works in a nutshell. But how did it begin? Unlike the vast majority of betting businesses, which spring to life as the result of individual enterprise, the Tote was in fact introduced by the British Government, being the brainchild of the Chancellor of the Exchequer back in 1928 – a man going by the name of Winston Churchill. You’ve probably heard of him.
Back in the 1920’s the only “legal” manner in which to bet on the sport of horse racing was through the on-course bookmakers, with those opting to bet away from the track being forced to rely on illegal back street operators. Concerned that not enough money was making its way back into the sport, the government introduced this pool betting vehicle as part of the Racecourse Betting Act of 1928, pledging that the money raised would be used for the betterment of both the sport of horseracing and the thoroughbred breed. It was a noble pursuit and one which – in theory at least – ought to prove more attractive to the betting public than simply lining the pockets of our good friends the bookmakers.
Key to this new initiative was the fact that the government company, and only the government company, would be permitted to operate pool style betting on UK horse racing – guaranteeing a monopoly on the product, but also assuring liquidity in keeping stakes together in one big pool rather than them being spread amongst a range of competitors.
Having originally gone under the (less-than-snappy) title of the Racehorse Betting Control Board, it wasn’t until 1961 that the business was renamed as the Horserace Totalisator Board, from which the current title of Tote derives. As is their passion, the cockneys were quick to step in with a bit of rhyming slang in referring to the Tote as the “Nanny”, as in Nanny Goat, a name which sticks to this day.
Initially offered only on the racecourses, it wasn’t until 1972 that the Tote were allowed to open high street betting shops – over a decade later than the privately-owned betting companies due to perceived integrity issues. It was also in this year that the Tote first began taking bets on other sports and added fixed odds betting to their offering, thus bringing the government-owned company more directly into competition with other high street operators, such as Betfred, for example.
From there, the Tote only continued to grow. Already in operation at the vast majority of British Racecourses, the betting shop estate eventually expanded to a total of 517, with these high street premises being branded as Totesport. Then in 1992, the launch of Tote Direct provided other operators with the facility to accept Tote bets in their shops – a hugely popular initiative that eventually led to Tote bets being placed in over 7,000 establishments throughout the UK.
A link-up with Channel 4 racing and the launch of the flagship Scoop6 bet followed in 1999, creating the first horse racing millionaire in 2004 and a stream of headline-grabbing jackpot winners ever since. All in all, things were looking pretty rosy for the tote, with the company blossoming into the type of operation that some of its competitors wouldn’t mind getting their hands on. If only the government didn’t own it…
Privatisation of the Tote
In the modern, capitalist era, there had been many in the betting industry who questioned why the government should even have an interest in a gambling company, never mind own one outright, with rumours of privatisation bubbling away from as early as 1989.
Remembering that part of the reason the Tote was initially set up was in order to provide competition to the privately run bookmakers, it perhaps shouldn’t come as too much of a surprise that these rumours met with staunch resistance from those within the sport. At first, it seemed that the objectors had won the day, with the government announcing the abandonment of privatisation plans in 1995.
However, this was an issue which wasn’t going to go away, and just two years later, in 1997, Home Secretary, Jack Straw, ordered a new study into the issue and, seemingly pleased with the results, made the privatisation of the tote a manifesto commitment in 2001. Whilst this really represented the moment at which the wheels were set in motion for the sale of this British institution, there were still a few hurdles that needed to be negotiated.
Firstly, it would be necessary to convert the Tote from a statutory corporation into a limited company – an essential step in facilitating a sale. Once this process was included as part of the Horserace Betting and Olympic Lottery Act of 2004, it became clear that the government really did mean business, and the Tote would soon be in new hands. But whose?
The government seemed to have a clear plan in place for this too, inviting a consortium of racing professionals and existing Tote staff to put forward a bid for the company. Despite being popular with all involved, this proposal ultimately came unstuck due to the amount of private equity required to back the bid, in combination with the alleged low price contravening European state aid regulations.
Accepting defeat with its preferred buyers, the government then announced in 2008 that the Tote would be sold on the open market. Only to quickly change its mind and place the sale on hold following a further financial review. Then, ever consistent in their inconsistency, the UK government performed one final about-turn, declaring in October 2009 that the Tote would be sold after all.
A switch from Labour to a Conservative-led coalition in 2010 did provide a potential spanner in the works, but whilst they don’t agree on too many issues, it appears that the UK’s two major political parties were united on this one. Finally, after a year of faffing about, bids were invited, and the Tote was up for auction.
The Hammer Comes Down
Bids began coming in from November 2010, with a total of 18 said to have been under serious consideration during the first phase. By the 31st January 2011, this initial field of 18 had been whittled down to a shortlist of five. Whilst the exact makeup of this quintet was never officially revealed, common consensus suggests that the final five consisted of existing bookmaking operators Betfred and Gala Coral, British billionaire property investors, David and Simon Reuben, a foundation set up by the existing Tote management, and Sports Investments Partners (SIP) a consortium led by British Airways Chairman, Sir Martin Broughton, who also served as Chairman of the British Horseracing board.
The narrowing down process continued, and by May 2011 only Betfred and the Sir Martin Broughton-led SIP remained. At the time, the majority of those within the horse racing industry – including the British Horseracing Authority – were said to prefer the SIP bid, which being largely backed by horse racing, rather than the betting industry insiders, was thought to more obviously have the sport’s best interests at heart.
The main reasoning behind the anti-Betfred stance seems to have stemmed from apprehension concerning the handing over of a product, designed to be for the benefit of the sport, to a profit-driven bookmaking operation, and how this would affect the level of funds making it back into racing. As such, it wasn’t anything specific about Betfred which created the misgivings – it could have been any bookmaker down to the final two and the industry likely still would have preferred the apparently more benevolent SIP bid.
In addition to these funding concerns, there were also those who suggested that Betfred supremo Fred Done’s main target wasn’t the Tote’s pool betting operation at all, but rather the 517 high street Totesport shops that came with it. Or more specifically the four Fixed Odds Betting Terminals (FOBT’s) contained within each of these 517 shops.
Considering that this whole auction unfolded at a time well before the FOBT maximum stake was reduced from £100 to just £2, with each machine estimated to average close to £1,000 in risk-free profit each week, it’s hard to argue that the acquisition of 2,000+ such machines wouldn’t, at the very least, have sweetened the deal for Betfred.
However, we can’t be too critical of a bookmaker spotting an opportunity for profit, and it is only right to add a note in Betfred’s defence here. Over the years the company have been amongst the biggest supporters of racing, through a raft of sponsorship deals – at one time sponsoring close to one in 10 contests to be run on British shores – in addition to personal donations made by Fred Done himself.
On the 3rd of June, 2011, and despite the industry as a whole having been vocal in their support for the SIP bid, it was announced that it was, in fact, Betfred who had been selected as the new owners of the Tote in a deal worth a reported £265 million, with £90 million of this immediately being invested in horse racing and a further £90 million going to the taxpayer. As part of the agreement, Betfred also committed to returning £11 million to the sport in the first year of operation, and a further £9 million per year in each of the next six years thereafter.
Why was the Betfred bid preferred over that of SIP? Whilst the exact breakdown of the government’s reasoning behind the decision has never been published, most assume that it was the greater certainty provided by the Betfred bid which won the day. Fred Done’s proposal dealt in cold hard cash and specific numbers, both in terms of the upfront payment and the ongoing commitment to racing.
In contrast, the Sir Martin Broughton-backed bid had sought to float the Tote on the AIM Junior stock market and hand racing an equity interest rather than the cash windfall of the Betfred offer. It is rumoured that this greater degree of complexity and uncertainty tilted the odds in favour of Betfred. That is just one theory, however, with the second being simply that Betfred won the auction in the traditional way, i.e. by offering more money than their rivals.
What Does £265 Million Buy You?
Regardless of the naysayers within the industry, Fred Done was over the moon with the deal, stating that, “Buying the Tote has been an ambition for years, so I am absolutely delighted.” Even to a man like Fred Done, £265 million is a fair amount of cash to part with so, other than the fulfilment of an ambition, what exactly did the shrewd Salford native receive for his outlay?
First of all, despite the vast sums involved, it did seem at the time that Betfred had bagged themselves something of a bargain. The rumoured bid turned down due to those private equity niggles in 2007 had been worth a reported £400 million after all, with Price Waterhouse Coopers again returning that £400 million figure when requested to value the company in 2008. Whilst the lingering effects of the global financial crash may have played a part in this price contraction, Fred Done likely didn’t get to where he is today through overpaying for things. As such, there seems little doubt that in addition to the realisation of a dream, Fred also viewed the deal as a shrewd financial investment.
Of course, whether the price paid represented a good or bad investment at the time is a matter of speculation. What we can be sure of though are the contents of the £265 million package. For their money, Betfred received exclusive control of racecourse pool betting for the seven years up to 2018, use of the respected and well-established Tote brand, and control of the Totesport website. Then of course there were those much-debated 517 high street betting shops – all of which were immediately rebranded as Betfred, moving the firm’s total past the 1,300 mark and taking a step closer to the traditional big three of William Hill, Ladbrokes and Coral.
The Tote Under Betfred
How did Betfred treat their new acquisition? Did any of those concerns voiced by the industry prior to the deal come to fruition? When taking over a relatively successful business, it is understandable that many new owners adopt the “if it ain’t broke, don’t fix it” approach, and overall, it seems this is the methodology to have been followed by Betfred regarding the Tote. Sticking to the same selection of bets, and continuing to operate under the Tote brand name at the racecourse, the most noticeable immediate impact was the rebranding of the 517 high street shops.
However, in time the new owners did show a willingness to invest in the brand, with both the website and mobile application receiving slick upgrades, bringing them more into line with the core Betfred offering. It must also be said that Betfred were pretty fair to the staff involved in the amalgamation of the two companies. Job losses in such scenarios are almost always inevitable, but Betfred pledged to keep redundancies to below 150 – out of a total of 9,000 staff – and to their credit, they stuck to this figure.
And, what of the concerns regarding the return of money to the sport? The first thing to note here is that despite having agreed to pay £11 million back into horse racing in the first year, and £9 million in each of the six years after that, Betfred in fact paid £12 million in each of the seven years of the deal, for a total of an extra £19 million over and above their initial pledge.
It would appear that there are no charges to answer regarding the total amount returned to the sport, but what about the distribution of this cash? Was this as efficient and fair as had formerly been the case? The previous system saw Tote profits across all 60 tracks shared out where needed, in a system that effectively saw the larger courses subsidising the smaller tracks.
Betfred’s critics had argued – for not entirely clear reasons – this distribution system may not be maintained under the new owners, resulting in the potential closure of a number of the smaller tracks. Again, this theory proved to be unfounded – there were 60 UK racetracks in operation at the time Betfred took over the reins and there were still 60 in operation when the firm relinquished control. Overall, when looking at Betfred’s running of the Tote, there’s nothing spectacular to report in terms of innovation but nor is there too much cause for criticism.
2018: Relationship on the Rocks
2018 marked the year when Betfred’s monopoly on pool style betting on UK racing came to an end. However, that fact did not necessarily mean that Betfred would cease to run the Tote operation. Indeed, at the time of the deal being struck back in 2011, Fred Done himself had been quoted as saying, there was, “No reason why this can’t go on forever”. An opinion backed up by Betfred’s finance director at the time, Barry Nightingale, who was of the opinion that, “We’re investing in the Tote, we’re going to be engaging with racing to create a lasting legacy and we will be involved in running the Tote for a long, long time.”
In the end, it turned out that the relationship would last neither forever, nor indeed for a long, long time, but rather only a shade over the seven years of the exclusivity agreement of the deal. As, in spite of the additional payments made to the sport, and the upgrades to the online offering, Betfred had failed to win over the industry. With the monopoly honeymoon period now over, the racetracks were faced with the choice of sticking with the Betfred-run Tote for their pool betting facility or seeking an alternative. In the end, they sought an alternative, and they did so in their droves.
Britbet & the Beginning of the End
From as early as 2016 there had been whispers of an industry-led plot to create a rival to the Tote. And, in 2018, this plot seemingly came to fruition. In advance of the monopoly period ending in June of that year, 55 of the UK’s tracks announced that they would no longer be using the Tote from that point onwards, but instead they would be switching to a new company.
A company which they themselves had set up, going under the name of Britbet. Under the new agreement, Britbet would modernise and install new technology at all 55 tracks and guaranteed a total of £50 million to the courses in question in a deal set to run until 2025.
Tracks not included in the Britbet deal included Ascot who opted to set up their own AscotBet facility, the twinned tracks of Bangor and Chester who also decided upon keeping things in-house, and the Betfred-owned Chelmsford City Racecourse, which was never likely to jump ship.
The news that the overwhelming majority of tracks were so eager to abandon the Betfred-owned Tote understandably went down like a tonne of bricks with Fred Done, who not only immediately announced the closure of 49 of Betfred’s 51 on-course betting shops but also ended all sponsorship of British horse racing events – a move estimated to have cost the industry in the region of £6 million.
As disappointing as this move was for Betfred, the company did still own the Tote, which whilst now unable to accept bets at the racecourses themselves, was still the only company in a position to provide pool betting off course. Remembering that this consisted of all of the pool bets taken in 7,000+ betting shops around the country, this still equated to a significant portion of the market.
With the racecourses now having opted to go elsewhere though, and the industry as a whole already having previously backed a non-bookmaker-owned Tote, how long would it be until a competitor began to infringe upon Betfred’s off-course market too?
In May 2018, seemingly bowing to the inevitable, Betfred agreed to sell a 25% stake of the Tote business to another new firm on the market going by the name of Alizeti. Led by racecourse owner and breeder, Alex Frost, this consortium of industry heavyweights – including the China Horse Club, Lord Webber and the Racehorse Owners Association itself – were unaffiliated to Britbet, but were likewise based upon the type of racing-centric ownership structure long favoured by those within the industry. Paying £20 million for this initial 25% stake, the deal contained an agreement to purchase the remaining 75% at an unspecified later date. The final countdown of Betfred’s time in charge of the Tote had begun.
As things stood though this created the undesirable situation of three players being involved in the running of pool betting in Britain: Britbet operating the pools at the tracks, and Betfred and Alizeti owning the off-course operation. This potentially fractious scenario could well have resulted in separate pools and dividends for the same races, depending upon whether bets were placed on or off course. Thankfully such a scenario was avoided when all involved agreed to continue operating as a single pool until at least 2025, with the Tote branding still being used.
Given their previous opposition to Betfred, and the swiftness with which they sought an alternative, it seems that the racecourse-run Britbet’s willingness to play ball was no doubt related to the fact that it was only a matter of time until Alizeti obtained full ownership of the Tote.
UK Tote Group
That moment came in October of 2019 when, aided by billionaire investor, Michael Spencer, purchasing a 10% stake in the company, Alizeti were finally able to stump up the cash to purchase the remaining 75% of the Tote. Betfred’s time in charge was finally at an end.
The overall price paid is reported to be in the region of £115 million in the end, which may sound on the low side, but it should be remembered that unlike the sum paid by Betfred back in 2011, this price did not include the on-course pool betting business, with the tracks in the main having already committed to using Britbet.
Still, becoming sole owners and operators of the digital side of the pool, including the Totesport website represented a momentous moment for the company. And in recognition of the attainment of their goal, Alizeti, which by now consisted of close to 160 backers, the majority of whom were racehorse owners and breeders, took the decision to rename themselves as the UK Tote Group.
With both Britbet – who continue to run the on-course side of the business – and this new UK Tote Group happy to work together effectively as a single pool, the Tote once again had a solid base from which to build towards the future. And in time, even the renegade operations at Ascot, Chester, Bangor and Chelmsford City all re-partnered with the Tote, creating a consistent arrangement across British racing.
The Modern Tote
That brings us to the present day in what has been one of the more eventful ownership tales in the gambling business in the modern era. Now that the UK Tote Group has their hands on this great British institution, what do they plan to do with it?
The early signs seem to be pretty encouraging in this regard, with a brand redesign immediately serving to brighten things up. The best early change though has come in the shape of the new digital home of the Tote at tote.co.uk. Launched in February 2020, this already appears to be an improvement on its Totesport predecessor, placing the emphasis on the core product of the business, and really what makes it unique on the British betting scene, i.e. pool betting.
Tote Guarantee & Tote Ten to Follow
In addition to this refocus, there have also been signs of innovation from the new owners. An inability of the Tote to compete with the Best Odds Guaranteed offer of the traditional bookmakers had long been a sticking point for the company, but a handicap that had largely been ignored in the past. The UK Tote Group have taken the bull by the horns in this regard by introducing the Tote Guarantee. Place a bet with the tote these days and should the industry SP be greater than the Tote dividend, you will receive the industry SP.
On top of this new offer, the proud new owners have also endeared themselves to their core racing fanbase with the reinstatement of the Tote Ten to Follow contest – a hugely popular competition which, for one entry fee, gives racing fans an interest throughout the season and the shot at a very big payout.
World Tote Association
Things are certainly looking brighter for the Tote than they have in some time, and who knows where the new owners will ultimately end up taking the business. A look at pool betting operations in other major racing nations would certainly suggest there is a fair bit of untapped potential here. Whereas pool betting represents only around 4% of total turnover here in the UK, that figure is significantly higher in other nations, with Australia’s 50% figure being a decent example of what can be achieved when capturing the imagination of the betting public.
Speaking of the international scene, the UK Tote Group have also shown a willingness to lead in this regard, becoming founding members of the World Tote Association – a link up with 20 other leading sports betting pool operators around the world. The hope being that pools can be commingled for major meetings and events, leading to greater liquidity and a more attractive product. A premise which was put into practice at Royal Ascot in 2020, seeing total stakes rise from £92 million in 2019 to £137 million in 2020. Which certainly represents a promising start.
What of Betfred?
Fred Done and co may well have been left with a little bit of ill-feeling towards the horse racing industry following their brief dalliance with the Tote, but it certainly doesn’t seem to have done business any harm. Picking up 322 premises in the fallout of the Ladbrokes Coral merger, Betfred now sit on a total of over 1,650 bricks and mortar operations and continue to be one of Britain’s major high street bookmakers.
Still proudly independent in a time of mergers and conglomerations, Betfred are showing signs of spreading their wings still further, with rumours of a planned move into the US market and having snapped up a 3% stake in rivals William Hill. Whilst not so much with horse racing these days, the company do still continue to give back to the sports on which they were built, lending significant financial support to the Snooker World Championships, the World Matchplay Darts and the British Masters Golf.