‘Brexit to blame’ for Pools buyout failure

‘Brexit to blame’ for Pools buyout failure

Wednesday, November 2, 2016 Posted by Andy McCarron
Buyer struggled to raise enough cash

Sportech will concentrate on continuing the task of turning around its Football Pools business after the sale of the business fell through due to Brexit-related City unease over the UK’s economic prospects, according to the company’s chief executive.

The company announced on Tuesday this week that potential buyers Burlywood Capital, the investment vehicle led by ex-Sportingbet founder Mark Blandford, had failed to raise the necessary funds to seal the £97.25m buyout.

Burlywood intended to fund a large part of the deal via an AIM flotation but post-Brexit jitters in the City are thought to have caused second thoughts among the buyout’s backers. The bid was announced in September but Burlywood had been working on the details, including the financing, since before the June referendum vote.

Speaking to TotallyGaming.com, Ian Penrose, chief executive at Sportech, said his company had “worked very hard to get the pools business moving in the right direction” for the past few years and that this work would continue. “Now it’s back to business as normal and we’re going to build on the opportunities and our 2017 operational goals,” he added. “There are inevitable distractions when you go through a process like we have.”

The Burlywood bid was led by ex-Sportech chief operating officer Ian Hogg and would have seen current pools boss Conleth Byrne take over as chief executive.

It is understood that as it became clear that Burlywood was going to be unable to raise the full amount needed to complete the buyout, the negotiators went back to Sportech with a lower cash bid and an offer to retain a stake in the new business.

Penrose said this made no sense for Sportech. “Why would I sell a business of which I have full control for a sizeable stake in a company I don’t control?” he asked.

Sportech said in its half-year results in August that the programme to modernise the pools was progressing well with the closure of the collector business and the remaining customers from this channel switched to either direct debit subscription or digital transactions. The Football Pools business generated revenues of £14m in the six months and £7m of EBITDA.

Penrose said the company was now awaiting the final ruling from the UK court of appeal regarding its £97m Spot the Ball VAT claim. The company is hoping for a decision any day now and Penrose said he was hopeful the appeal from Her Majesty’s Revenue and Customs (HMRC) would fail. This will allow the company to contemplate what it will do with the surplus £36.2m it has as cash on the balance sheet with Penrose saying a mixture of possible acquisitions and a return to shareholders being most likely.

The remaining element of the Sportech business is the US-facing racing and digital tote operation, which includes the running of sports bar venues in Connecticut and California and the newest element of that business which is in-stadia lotteries and raffles.

Totally Gaming says: The failure to sell the Football Pools comes as something of a blow to Sportech bearing in mind the amount of time and effort that will have gone into this deal. The failure of the Burlywood bid is the first sign in the UK of the impact of Brexit – clearly there is less appetite on the City for new ventures right now given the medium and long-term uncertainties in the UK.

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