By Mark Kleinman, City Editor
The private equity group behind Formula One motor racing is mulling a takeover approach for Betfair, the online betting exchange which floated on the London market three years ago.
I have learned that CVC Capital Partners, one of the biggest buyout firms in the world, is in the early stages of considering a bid to take Betfair private.
The private equity group, which has reaped a handsome profit from its investment in F1, has not approached the board of Betfair, and has yet to line up financing for a bid, insiders said on Saturday.
Betfair's share price has risen sharply in recent months, largely on the back of speculation that it might be ripe for a takeover.
One person close to the situation cautioned that the company's share price "already contained a takeover premium", and warned that a further jump in the value of the stock may bring a premature end to CVC's interest in the company.
On Friday, Betfair's shares closed at 699.5p, roughly 9 per cent above a 52-week low set in January.
The authorities which govern the City's takeover disclosure regime have become increasingly fastidious in recent years and are likely to force CVC to declare its hand if Betfair's share price moves sharply on Monday.
One person familiar with CVC's thinking confirmed that it had begun contemplating an offer for Betfair but said it may yet opt to cease that work if approached by the Takeover Panel, enabling it to issue a statement saying that it was not pursuing an offer.
"We never comment on market rumour or speculation," a CVC spokesman said on Saturday.
Key to the success of any bid to take control of Betfair would be the attitude of the gambling exchange's founders, Andrew Black and Edward Wray.
Between them, they own approximately 20% of the company, with a number of big technology investors such as the Japanese firm Softbank and Balderton Capital also holding significant stakes.
It is unclear whether CVC has approached either Mr Black or Mr Wray about its interest, although one insider said any takeover ambition would be "dead" without their support.
Betfair floated at £13-a-share, but its poor post-listing performance left investors nursing significant losses, making it one of a series of prominent companies, such as Ocadon, the online grocer, and Glencore, the commodities trader, to suffer a slump in its value after launching an initial public offering.
Betfair has endured a torrid time during its brief life as a public company, parting with a string of top executives.
The current boss, Breon Corcoran, joined in 2012 from rival gambling group Paddy Power. He has opted to reshape the company's operations, withdrawing from troubled Eurozone markets such as Greece, and selling non-core assets such as its stake in LMAX, a financial trading platform.
Like many gaming companies, it has also faced regulatory battles over tax issues, leading to a decision to pull out of the German market. It now intends to focus on regulated markets, and is attempting to turn around the fortunes of its struggling online poker business.
Last month, Betfair reported a 4% fall in unaudited revenues for the three months to January 31 against the same period a year earlier.
"Betfair performed well in the third quarter and the business is on track against our full year expectations. UK revenue was up 6% driven by the continued strength of mobile betting as well as favourable sporting outcomes," Mr Corcoran said in March.
"In line with our previous guidance, international revenues declined as a result of regulatory change and our focus on sustainable jurisdictions.
"The new leadership team is in place and has started to implement the changes required to make Betfair a more focused and leaner organisation."
A spokesman for Betfair, which is chaired by Gerald Corbett, the former Railtrack boss, declined to comment.
CVC, which owns stakes in the Virgin Active gyms chain and the parent company of Madame Tussauds, has an extensive track record in the leisure and sports industries.
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