British bookmaker Betfred has confirmed earlier reports that it is interested in buying struggling South African horse racing and sports betting operator Phumelela Gaming and Leisure.
Phumelela announced earlier this week that Betfred has made an offer to buy all of the South African company’s assets for between R875 million and R925 million. The British bookmaker has also promised to keep Phumelela’s business assets and its staff.
In May, the South African racing and gambling operator suspended trading of its shares on the Johannesburg Stock Exchange and filed for bankruptcy protection. It told investors that the best option it had to ensure its long-term survival as well as that of South Africa’s horse racing industry was to implement a business rescue plan.
Business rescue plans provide financially troubled companies with temporary relief from creditors to give them a little bit of time to restructure their operations.
Phumelela has been struggling to cope with heavy financial troubles since last year when regulatory changes in the Gauteng province stripped the company from its share of a mandatory 6% levy on winnings from betting on horse races.
The recent suspension of horse racing in South Africa and the rest of the world due to the Covid-19 pandemic deepened Phumelela’s issues.
Mary Oppenheimer Daughters First to Come to Rescue
Phumelela’s business rescue plan involved selling some of its assets to Mary Oppenheimer Daughters (MOD), a fund operated by South Africa’s richest family. MOD has already provided the racing operator with a R100 million financial lifeline and has promised additional financing of R550 million that would be delivered in three tranches.
Phumelela said this week that Betfred’s offer involves “all assets of Phumelela, and not merely some of the assets as contemplated in the offer made by MOD.” As mentioned earlier, the British bookmaker has offered to pay up to R925 million for the South African company.
In addition, Betfred has offered an additional R650 million loan that Phumelela will be able to use to pay creditors’ claims in full. Under MOD’s proposal, creditors would be repaid only 72% of their claims. Betfred would also provide that funding well in advance of MOD’s proposed timeline from earlier this year.
The rescue plan involving MOD’s offer was supposed to be voted on by Phumelela’s creditors on September 1. The plan needs approval from 75% of the company’s creditors in order to move forward.
However, the horse racing operator said this week that Betfred will propose the meeting to be adjourned in order for the plan to be revised for further consideration. If Betfred’s offer gets rejected by September 1, it will lapse, it also became known.
If Betfred acquires Phumelela, that would mark the company’s first foray into the South African market. The British bookmaker has also been actively pursuing expansion opportunities in the nascent US betting market and has entered several states where athletic gambling has become legal since the May 2018 strikedown of a long-standing federal ban on the practice.
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