Government ministers have been advised not to sell the state-owned Tote to a racing consortium for a knock-down £320m bid because it is likely to contravene EU rules.

The government’s adviser, accountants PricewaterhouseCoopers, said that such a deal would not represent the open market price — particularly as bookmaker and casino operator Gala Coral is reported to be willing to pay £405m. In January, the Tote was valued at £400m.

The consortium was formed earlier this year by Tote management and staff, the Racecourse Association and the Racehorse Owners’ Association with the aim of acquiring the Tote. Its bid had been cut down from an initial £400m because backer Lloyds TSB had reduced its debt provision from £330m to £250m. The remaining £70m equity was expected from the racing industry.

Treasury officials are believed to be sceptical about whether racing can raise this amount of equity at a difficult time for racecourses and bookies.

This news story was first published in Horse & Hound (22 November, ’07)