Earlier this year, South African betting operator decided to sell its horseracing business due to financial problems. Among interested was a British operator Betfred. However, creditors of South African racing operator have declined their offer to acquire Phumelela Gaming & Leisure and instead opted for a business rescue plan.
One of the wealthiest South African families are backing Mary Oppenheimer Daughters fund that will take control over Phumelela assets and rights. This family is also one of the biggest Phumelela's creditors.
Unlike some betting operators that diversify their offering with live casino and similar online gambling activities, Phumelela is specialized in horseracing and totalisator betting. With that being said, majority of Phumelela revenue came from betting, a profitable stream for a long number of years, which changed for the worse after regulatory updates in the country, leaving the company in financial problems after their main revenue stream was hit.
Betfred's last minute offer
Betfred's interest in Phumelela goes back to August this year, when rumours about their interest in South African company began to surface. Soon, official proposal was on its way.
Contrary to Mary Oppenheimer Daughters offer which included financing in exchange for the racing assets, Betfred made a sudden and last-minute bid to take over the entire company and full repayment. If Phumelela accepted, they would get a full repayment vs MOD's 72% minimum guarantee. In addition, Betfred also offered a R650 million loan and put up with 20m shares of William Hill, a rival company, to prove their good intensions.
Although Betfred is lacking experience in the South African market, they did the UK Tote for 8 years (2011-2019). Last year the company has sold Tote to Alizeti Capital after founder Fred Done's dispute with stakeholders. Apparently, number of issues have appeared, which forced Done to withdraw Betfred from UK racing.
Betfred obviously offered a better deal, but creditors were not happy with it as there was no telling about Betfred's future plans and commitment, forcing creditors to make decision in favour of keep the company in local hands.
Minority shareholder almost compromised the deal
Efforts to save the company were almost derailed when a legal challenge appeared from the side of Gold Circle, partner of the Australian Tabcorp operator in tote betting. This partnership brings Phumelela quarter of their betting revenue. However, Gold Circle is a minority shareholder in Phumelela, controlling 39% of the shares. Gold Circle claims to have the right of transferring the shares from Phumelela "on demand", but John Evans as rescue practitioner rejected their claim by citing Gold Circle's own financial statement. Later, South Guteng High Court dismissed Gold Circle's application, allowing the creditors to continue with their plan.
In this offer, there is a one-year window for Phumelela's overseers to look for potential buyers interested in the company's assets, which includes well-known brands like Superworld, Betting World and Superbet. How hard will it be to find interested buyers is yet to be seen, as well as what conditions rescue overseers have, considering Betfred's offer was declined due to it being a foreign company. It seems as executives would like to keep the company in local hands, leaving Phumelela's future uncertain.
