Betfred makes ZAR925m offer for beleaguered Phumelela
British operator Betfred has made an offer to purchase struggling South African racing operator Phumelela for between ZAR875m and ZAR925m (£39.6m-£41.9m/€44.2m-€46.7m/$52.1m/$55.0m).
The deal serve as an alternative to Phumelela’s business rescue plan, which would see Phumelela sell its horse racing business and other assets to Mary Oppenheimer Daughters, an organisation run by the family of the late industrialist Harry Oppenheimer.
The business rescue plan, a form of bankruptcy protection in South Africa, was implemented after the novel coronavirus (Covid-19) crisis left Phumelela in dire financial straits.
Betfred said that as its plan involved purchase of the entire Phumelela business, it would “result in result in all creditors being paid 100% of their claims”, unlike the business rescue plan, which would see some creditors receive only 72% of money owed.
The offer – made up of a ZAR875m initial consideration and a conditional deferred ZAR50m consideration – must be accepted or rejected by 1 September, though Betfred reserved the right to extend this deadline. That day Phumelela's creditors are due to meet to discuss the offers.
If the purchase is successful, Betfred will provide a loan of ZAR650m to Phumelela to help pay its debts. This loan is to be paid in in two tranches with the second payment occuring by 15 November, 2020, more than a year earlier than Mary Oppenheimer Daughters intended to pay the last of its three tranches to creditors.
Betfred has also promised that all business and staff jobs will be protected in the potential acquisition, and that it will keep all of Phumelela’s assets together “for the benefit of racing and betting in South Africa”.
It added that its “international expertise and unparalleled track record”, such as its record operating the UK Tote from 2011 to 2019, would help improve the viability of South African racing.
“In the face of a challenging global and domestic economic environment, the offer represents a vote of confidence in the South African economy and a direct response to President Ramaphosa’s drive to boost the South African economy by securing USD$100 billion in foreign investment by 2023,” Betfred said. “Furthermore, as highlighted above, 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.
“This investment should not only be beneficial to Phumelela’s creditors and other stakeholders but also to horseracing and betting and South African society in general.”
Betfred said its goals for Phumelela are to grow the brand of South African racing across the globe by expanding existing partnerships in the UK and Australia and creating new ones in mainland Europe, Asia and the US.
“Through intelligent marketing, an engaging user experience, and global appeal, this could prove to be a turning point for South African horseracing,” it said.
Betfred also said that it had expressed interest in acquiring Phumelela in July, making three earlier offers. The operator’s board now believes that its latest offer addresses “each and every concern” raised about the earlier offers.
The deal values Phumelela’s horseracing assets at ZAR325m, Phumelela’s assets in its Phumelela Gold International joint venture with Gold Circle at ZAR330m and the Betting World business at ZAR220m.
Betfred has encumbered 20m shares of William Hill, worth around ZAR714m as of 25 August, the date of the offer, as security for the deal.