UK bookmaker Betfred’s offer to acquire Phumelela Gaming & Leisure has been rejected by the beleaguered South African racing operator’s creditors.
On Tuesday, Phumelela’s creditors voted in favor of a business rescue plan that will see Mary Oppenheimer Daughters (MOD) – a fund backed by one of the country’s wealthiest families that is also one of Phumelela’s biggest creditors – assume control of Phumelela’s horseracing assets, racetracks, offshore assets and broadcast rights.
Phumelela filed for business rescue (a local form of bankruptcy protection) in May after its debts began to swamp its dwindling revenue. The company is coming off the “worst year” in its 22-year history after regulatory changes in Gauteng province deprived Phumelela of a vital betting revenue stream.
While MOD offered Phumelela some emergency financing and the promise of a bigger payday in exchange for the racing assets, Betfred made a last-minute bid for the entire Phumelela business that promised creditors full repayment versus MOD’s minimum guarantee of 72% repayment for most non-bank creditors.
While Betfred’s offer was superficially more attractive than MOD’s, creditors reportedly agreed with MOD’s argument that Betfred’s offer was purely speculative without any commitment to follow through. The desire to keep Phumelela in local hands undoubtedly also played a role in how the vote went down.
The rescue process was nearly derailed by a late legal challenge from race betting operator Gold Circle, a minority shareholder in Phumelela Gold International, which is part of the Premier Gateway International tote betting joint venture with Australian operator Tabcorp. This tote business accounted for 26% of betting revenue in Phumelela’s most recent fiscal year.
Gold Circle says it controls 39% of Phumelela Gold shares, which gave Gold Circle the right to claim a transfer of those shares from Phumelela “upon demand.” Phumelela’s business rescue practitioner John Evans rejected this claim, saying the relationship with Gold Circle had concluded. Evans reportedly cited Gold Circle’s own financial statements to refute the company’s argument.
Gold Circle’s urgent application was dismissed by the South Gauteng High Court on Tuesday, which allowed the creditors’ vote to proceed as planned.
MOD’s offer also gives Phumelela’s rescue overseers another year in which to find buyers for the company’s other assets, including its betting brands Superbet, Superworld and Betting World, along with some real estate.