Betfair set float price

[Euler]

Not sure where this has come but here it is: -

At 5pm on Monday evening, all seemed still to play for in the great Betfair takeover stakes.

Those private equity raiders from CVC had already raised their proposed offer for the betting exchange operator three times, up from 880p a share to 920p and then, on Sunday night, to 950p.

CVC had declared the last one, valuing Betfair at £990m, “full and final”. But, despite that, Betfair chairman Gerald Corbett had given CVC one more chance to “further improve” its proposal. The hint was that the board might play ball at something close to £10, even 975p.

To help CVC get there, Betfair put up new chief executive Breon Corcoran and chief financial officer Alexander Gersh. On Monday they met CVC’s UK boss Rob Lucas and a London partner, Pev Hooper, at the offices of Betfair adviser Goldman Sachs. It was the first talks between the two sides’ management.

When, at just after 5pm, Betfair said it had agreed to a 24-hour extension of CVC’s put-up-or-shut-up deadline, some might have wagered a deal was on the cards. They would have lost their money. Five hours later all bets were off.

Why the talks broke down is now hotly disputed. CVC, which was working with 6pc investor Richard Koch and another shareholder Antony Ball, simply said it had “been unable to agree financial terms with the board of Betfair”.

But Betfair bridles at that, claiming the real reason is far more complex, as its statement to the Stock Exchange implied. It said that, during Monday’s discussions, “it became clear that it would not be possible to agree the terms of any proposal in conjunction with a business plan that was deliverable”.

CVC’s proposal, claim Betfair sources, was wholly reliant on poaching Corcoran and his team, as it had failed to line up any management of its own. Not only that. It wanted Corcoran to back a business plan that was so far removed from the one that the new Betfair boss had presented only a few days earlier as part of the group’s defence that he would have been unable to have done it with a straight face.

“CVC had a cloud cuckoo plan and no management,” claimed one insider.

The private equity firm, which typically tries to work with existing management, would disagree with that. But there were strategic differences.

The CVC plan was partly penned by Koch, a long-term advocate of keeping the exchange – built on peer-to-peer betting – the absolute centre of the business. Koch has been dubbed an “exchange evangelist”, like ex-Betfair managing director Mark Davies, who in a recent blog cautioned against the group becoming a conventional “me-too” gambling company.

Alongside that, the CVC plan called for a focus on cash margins and a cut in customer numbers, concentrating on the big fish not the minnows. That allowed the marketing budget to be slashed from a historic £90m-£100m a year to £20m as Betfair stopped chasing tiddlers only interested in £10 free bets.

By contrast Corcoran, who joined from Paddy Power last August, has put Betfair’s new sportsbook – offering similar fixed-odds wagers to other bookies – at the centre of his strategy.

He sees Betfair’s unique proposition as the interplay of the exchange and the sportsbook, highlighting how it helped drive an 18pc rise in customers in the past six months, with 24pc of football punters now betting on both.

“I’m paid to drive shareholder value not to pay homage to the exchange,” Corcoran declared tellingly last week.

He’s also earmarking an extra £10m of cost savings he’s found for marketing.

Even so, sources close to CVC claim the strategic differences are not as big as Betfair suggests. “All they are trying to do is deflect attention from the fact that they turned down 950p,” said one.

Indeed, even with the shares dropping just 30 to 865p yesterday, some big shareholders are livid. Half the shares are owned by investors from before 2010’s disastrous £13-a-share float. Many, thought to include Japan’s Softbank and co-founder Andrew Black, with around 7pc, were happy to back CVC at £9.50 or less because it planned to allow them to roll over their investment and benefit from any upside.

Protecting Corcoran from the bid fall-out is also a key motivation of the Betfair board. Last week he admitted that, thanks to the bid, “we are showing a bit more leg than we might have like to”.

Now he has 950p to shoot for, you hope he’s not already shown too much.

[Euler]

Bert sold 850k shares on the 14th May

http://www.investegate.co.uk/betfair-gr ... LC%20Alert

[Euler]

http://www.telegraph.co.uk/finance/news ... -fail.html

Richard Koch is not used to failure. The author, investor and 6.4pc Betfair shareholder puts his personal wealth at £140m, says his financial priority is “to become a billionaire” and has just published a book sub-titled “Ten Ways to Become a Great Leader”.

So ask him why his bid for Betfair fell over and he looks genuinely perplexed. Mr Koch, 62, had teamed up with private equity firm CVC to table a near-£1bn offer for the betting exchange group and came within a nose of landing the prize.

“We really should have got the company,” he says, giving his first interview since the collapse of the bid last month. “We had a lot of shareholder support – over 50pc. I still don’t really know why it failed.” He bursts out laughing, tending to back his claim that “there’s no point being cross” about the outcome.

“No doubt we made some tactical mistakes. But the main reason was probably time,” he says. “Everything had to be done in a rush because of the requirements of the Takeover Code. We got the worst possible introduction to the chief executive, Breon Corcoran. I’m a great fan of his. But he didn’t really like some of the pressure he was being put under, I don’t think. And we weren’t able to talk to him until the very last minute.”

In a manic 48 hours, CVC twice raised its indicative bid from 880p a share to 920p and then 950p. And that was before it dangled the prospect of around 975p if the board let the private equity raiders talk to Mr Corcoran, who joined Betfair last August from rival Paddy Power.

“He was put in a very difficult position where he had to basically decide whether he was going to go along with it. And because we were such fans of his we didn’t have an alternative management team, which was probably a mistake,” says Mr Koch sheepishly. “If we had our time again we would do it slightly differently.”

Mr Corcoran’s position was made all the harder because he had outlined his own strategy for Betfair just days before meeting CVC. Upping the ante, he raised guidance for full-year profits, increased cost savings from £20m to £30m and provided early evidence of how adding the new sportsbook to the traditional exchange was boosting customers – though he stopped short of returning any of the company’s £150m free cash.

Mr Koch, a huge fan of the exchange model of peer-to-peer betting, had an altogether different plan for a business he had bought into in 2001, roughly a year after its launch. His £1.5m wager has already proved his “most successful investment” – better even than Filofax and Plymouth Gin. He sold 23pc of his holding to Japan’s Softbank in 2006, making a £27m pre-tax profit.

His plan for Betfair had echoes of the “Pareto Rule” that has come to shape his life since, as a 19-year-old student, he stumbled across the work of 19th-century Italian economist Vilfredo Pareto in Oxford’s Bodleian library. The rule broadly stipulates that 80pc of results come from a relatively small amount of causes – just 20pc. He has seen this everywhere, citing a historic survey from the Prudential insurer that showed “80pc of the sales were sold by 20pc of their salesmen”. Fifteen years ago, he wrote a book, The 80/20 Principle, which has sold more than 1m copies.

The principle, he insists, goes just as well for Betfair’s 900,000 customers. “One thing that relates to the book is that it is usually a small amount of customers that accounts for a large proportion of your profitability,” he says.

So he advocated cutting customer numbers to focus on the big fish, not the minnows. That would have allowed a drastic cut to the annual marketing budget – from £90m-£100m to just £20m – as Betfair stopped trying to lure tiddlers interested only in £10 free bets. “You have to focus on the core customers and provide new products for them,” he says.

There was another major difference, however, for a business still reeling from 2010’s £13-a-share float. “The basic thesis, apart from the change of plan, was that this should not have been a public company,” he says. “Let’s face it, it hasn’t been successful and it has a balance sheet that has got about £150m cash. It generates a lot of cash, so it’s a perfect proposition for a moderately leveraged bid.” The Koch/CVC plan envisaged “about £350m” of debt – and it’s easy to see why investors, including Softbank and co-founders Ed Wray and Andrew Black, were prepared to back it.

“Shareholders could keep their existing stake and pretty much get back what the share price was before the bid,” says Mr Koch. “They could have their money and still have the same percentage stake in the company, which is the magic of gearing. You can’t do the same thing in a public company.”

So how did his bid lose? The board had few cards, he says, but “the major card was Breon. We also had to get a recommendation from the board. Gerald Corbett, the chairman, played it extremely astutely. He had a weak hand but he managed to get a pretty high price and at the end I think he was pretty surprised it didn’t happen either.”

He says he understands Mr Corcoran’s position too. “Think about the psychology of it. He had been a loyal chief executive, trying to defend the company and make sure if it was sold it was sold at the best possible price. It was a friendly bid. But in the heat of battle people take up positions. So the psychology of it was all wrong. It had got to the end and then he gets told, 'perhaps we should accept the bid and do you want to go along with it?’. He was forced to make a decision in a very short period of time. And this is pure speculation on my part, but it sounded as if he just felt it was unreasonable.”

He believes the talks could have been extended, but is not one to dwell. “We had a chance. We made some mistakes. And we came extremely close. But that’s life,” he says. “I am now a loyal shareholder. I have been put back in my box and I’m quite happy in my box.” He’s since had “a long friendly telephone call with Breon. I like the guy. He’s very humorous.” Both believe in new products making the best of the exchange and the sportsbook. So now it’s back to writing books. His latest is a familiar theme – The 80/20 Manager – which applies Pareto’s law to management. “I started thinking can you measure a chief executive’s productivity,” he says. “Their basic job is to make decisions. Only a tiny proportion of their time accounts for the good and bad that they do.”

He cites Michael Eisner, the former Walt Disney boss. “He was time-panicked because he was obsessed with working hard. He once said in 28 years he had only taken one day off. One day he gave a eulogy for Frank Wells, one of his key managers, and he said 'sleep was Frank’s enemy, he always wanted to get one more meeting in’. Well this was a eulogy given at the guy’s funeral. He died in a helicopter crash because he was rushing from one meeting to another. If it wasn’t so tragic it would be really funny.”

He says Eisner was “very successful in the early days at Disney. But they did a study and found that about 95pc of the profit improvement came from three decisions: he put the price up at the theme parks, he opened more Disney hotels and he put the animated classics, like Snow White and Bambi, on DVD. How long did it take him to make those decisions? Maybe a week.” So what did he do for the rest of the time. “Beats me,” he says. “I really think there is a myth about management. Everyone believes in hard work, but actually it’s about making the right decisions.”

Mr Koch dismisses the notion that it’s only by making thousands of decisions that you make the right three. “You just have to think carefully about what you do. The secret is to be lazy but also extremely ambitious. I don’t work very hard, probably about three hours a day.”

It’s a work ethic that has produced houses in the Algarve, Marbella and Cape Town, and time for “riding my bicycle through the orange groves” and “long walks with my partner and my dog”.

“I always say to people the most important decision you can make is which company to work for and which particular boss to work for. Unless the company is growing very fast and unless the boss is going places, you won’t.”

It was a philosophy that saw him leave Boston Consulting after being “effectively fired” and join a consultancy growing five times as fast – Bain – before leaving to start LEK, another management consultancy. “If a company’s growing at 40pc to 50pc a year, you can hardly go wrong.”

He grins. “If you seriously want to be rich, I don’t think it’s very hard, you just have to be crafty at spotting opportunities.” His current portfolio includes fantasy sports group Fan Duel, payments company Ixaris and hair-removal outfit CyDen. Who knows, one of them may even turn out to be the next Betfair.

[Euler]

Final 'old' board member is leaving after nine years. No job to go to!

Cruddace set to leave Betfair

04 JUN 2013 | RACINGPOST.COM Betfair's legal chief Martin Cruddace is to leave the company this autumn after nine years with the betting exchange.

Cruddace, who joined Betfair as group director of corporate and legal affairs in July 2004, made the decision to leave his role following the successful conclusion of a number of regulatory issues.

Betfair chief executive Breon Corcoran said on Monday: "Martin has made a significant contribution to Betfair's development over the last nine years and has decided now is the right time to step down. I would like to wish him the very best for the future."

Cruddace, who is also company secretary, will give up his executive roles at the end of this month but will not officially leave the exchange until early September. It is understood he will spend the summer deciding on his next career move.

In recent months a number of issues have been settled, including the long-running legal battle with William Hill over whether some betting exchange clients should be liable to levy.

Italy and Spain have recently approved betting exchanges while the five-year £40 million commercial agreement signed with the BHA last year, along with the court of appeal case against William Hill, sealed Betfair's status as a partner with the sport's rulers after years of friction.

BHA chief executive Paul Bittar negotiated that deal with Cruddace and said: "I am sorry to hear of Martin's departure and wish him well in the future. No-one could question his commitment to the Betfair cause and he was a driving force behind the groundbreaking commercial deal struck last summer - it simply wouldn't have happened without him - and he showed considerable foresight to bring the parties together."

Cruddace, who was perhaps the last of the main figures left at Betfair from the 2010 flotation, joined the company from law firm Schillings. He was previously head of the legal department for Mirror Group Newspapers.

[Euler]

I'm mulling over putting in a short on Betfair ahead of their results. Anybody else?

[herbie]

Go on convince me

[Euler]

Betfair FY results

Revenue of £387.0m (FY12: £388.5m)

Nothing in the release we didn't really know already

http://www.investegate.co.uk/betfair-gr ... 00099603H/

[Euler]

Results presentation: -

http://corporate.betfair.com/~/media/Fi ... tation.pdf

[Euler]

Results presentation will be streamed live from: -

http://www.livestream.com/betfair_internal

[Euler]

Bit odd how they are saying they have added Exchange based features to the sportsbook such as cash out. As we learnt the cashout is not exchange based at all?

[andyfuller]

I think it is a play on words. They are effectively saying they took the idea from the exchange and applied it to sports book. Not that the sports book cash out uses the exchange to cash out.

I found this interesting:

In May 2013, we changed the base level of commission from the standard 5% to between 4% and 7.5% in five countries and have recently extended these trials to a further 18 countries. This will provide a better understanding of the effect of different pricing structures on the Exchange ecosystem and revenues.

And this:

We are also investing to improve our products for our ‘sophisticated’ customers. Betfair has a number of high-value customers using third party applications and automatic trading programs, which utilise our Application Program Interface (API) to directly access the Exchange. We have recently launched a new API to allow these vendors to build out more sophisticated trading tools to provide an improved user experience for this important customer segment.

[Euler]

I think it's a shame that they are not talking about how unique the exchange is, it's all sportsbook and games and other stuff. It's all gone very "corporatey". No surprise there now that they are a listed company, but it feels like they have lost their way in terms of their USP.

[andyfuller]

The exchange hardly gets a look in these days! All the growth seems to be focused at the sports book. They just said the Exchange is very mature - isn't that different to Mark Davies recent comments on his blog...

Mark Davies:

Before long, the talk became that Betfair had saturated its audience of possible exchange customers, which explained the slowing growth. But I think that view needs challenging, even if just on the basis of anecdotal evidence. I know scores, if not hundreds, of decent-sized, sophisticated punters who don’t use Betfair, which suggests to me that far from saturating its audience, it has barely scratched the surface (and that’s just in the UK).

http://www.markxdavies.com/2013/04/20/fantasy-betfair/

[Euler]

Sportsbook is tiny though, so much energy being spent on something that isn't a major part of the business or unique. It's like the BBC opening a new office in North Korea.

[Euler]

Breon refused to talk about premium charge but said he would be 'delighted' to lower charges if he could, but there are currently no plans to do so. He acknowledges it upsets a lot of people.