Got Shares In Betfair?

There is a chance that Betfair’s troubled three years on the stock market could be coming to an end, if the latest reports in the financial media are to be believed. Private equity firm CVC is said to be considering a takeover offer though to be worth an estimated £800 million, which has caused Betfair’s usually floundering share price to rocket by 12% at its peak yesterday (as reported by the WSJ). Although there has been no confirmation by Betfair bosses or by CVC executives that a bid is in the offing, industry gossip has nevertheless leaked the news, seeing it as a rescue for a company, who, by their own admission has “lost their way”.

The current Chief Executive (the latest in a long line of CEOs trying to save the ailing brand), Breon Corcoran, who joined Betfair from Irish rival Paddy Power in early 2012, made the comment shortly after his appointment, and has since taken several drastic steps to try and reduce its shortcomings. These steps include pulling out of the troubled Greek and Cypriot markets and backing out of Germany due to on-going license problems. However, the share price has continued to tumble, nevertheless, with shares losing half their value since the flotation in late 2010.

But what does this mean for the Betfair shareholder? Shareholders were promised the moon when the company first floated – with an IPO valuation of 30 times historic earnings, they had to be. Huge, rapid expansion never materialised, and large chunks of the company have been sold off. Nevertheless, Betfair offers a unique betting platform and is a cash rich brand with lots of potential – providing they can turn around their fortune.

CVC could bring its own benefits to the brand however. The private equity firm owns the Formula One motor racing brand, as well as gym chain Virgin Active and the parent company of Madame Tussards. Plus, they already have experience in the gambling sector, having bought William Hill in 1999 and selling three years later.

If you have shares in Betfair, you are advised to stay up to date with the latest developments from both Betfair and CVC, and think carefully about your own interests. CVC cannot tender a bid unless all the shareholders agree, and the result must be right for the future of the firm. With 39% of Betfair shares still owned by four shareholders (including Richard Koch and Antony Ball) it would look like any potential bid for the company will see stiff negotiations, given the potential which still exists for the brand. If CVC are expecting Betfair to be an easy buy, they could be sadly mistaken.

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