UK-based online betting exchange Betfair is being targeted for a takeover by private equity group CVC Capital Partners, according to a report by Sky News’ City Editor Mark Kleinman. However, Kleinman reported that CVC has neither approached Betfair’s board of directors regarding the potential takeover nor lined up the necessary financing to make such a takeover possible. Key to the takeover plans will be the support of founders Andrew Black and Edward Wray, who together control 20% of the firm’s shares. Neither CVC nor Betfair opted to comment on the rumors.
Ironically, knowledge that a takeover is in the works may queer the bid. Part of the appeal behind a takeover is the widespread perception by analysts that Betfair stock – which closed out the week at 699.5p – is undervalued. Betfair went public in October 2010 at a value of £13 per share, ending its first day as a public company at £15.5. Since then, it’s literally been all downhill. The stock hit an all-time low of 517p on Aug. 1, 2011, and hasn’t risen higher than 901p since March 2012. Should news of the takeover bid cause a spike in Betfair’s price come Monday morning, the UK Takeover Panel may compel CVC to formally declare its intentions, which could be enough to cause CVC to look elsewhere for acquisitions. The London-headquartered CVC currently manages around $46b in assets.
Since assuming the reins last year, Betfair’s new CEO Breon Corcoran has embarked on a questionable strategy focused on regulated markets. The subsequent withdrawal from ‘grey’ markets in Cyprus, Greece and Germany has taken a big bite out of Betfair’s revenues, which the company has addressed by making hundreds of staffers redundant. Betfair has also put a new focus on shifting away from its pure exchange betting roots with the acquisition of fixed-odds betting outfit Blue Square from Rank Group.