Betfair boasts booming client base to defy predators

A consortium led by private equity firm CVC walked away after its third potential offer – an 8 per cent increase on its first approach in April – failed to tempt Betfair’s board.

Under the chairmanship of former Railtrack boss Gerald Corbett, Betfair rejected CVC’s “full and final offer” on valuation grounds and said it was making “excellent progress” under new chief executive Breon Corcoran.

The firm upped its guidance in May, saying it expected underlying earnings for the year to 30 April to be £73 million, although this will still be a  15 per cent year-on-year drop.

The group said revenues had been better than it expected thanks to robust sportsbook turnover, particularly through the mobile channel.

It also increased its UK customer base by 18 per cent in the second half of the year.

Betfair’s betting exchange works by matching punters and allowing them to bet against each other, which it says eliminates the need for a traditional bookmaker.

It charges a commission on the bets and processes seven million transactions a day.

Betfair is undergoing a strategy overhaul and cost-cutting drive – a move that has led to 500 job losses. It increased cost reduction plans in May, with aims to save around £30m over the next two years.

Richard Curr, head of dealing at Prime Markets, said: “Betfair’s rejection of the 950p CVC Partners bid looks as though it could prove to be a master stroke. “Days after rejecting the ‘final’ 950p bid, brokers Investec and Numis published ‘buy’ notes for the online betting group, citing the uplift in profit estimates from the 7 May trading statement.

“The historically cautious Betfair management team are sounding exceptionally bullish over prospects: they couldn’t possibly reject a 950p per share bid out of hand without being very sure of the company’s near-term prospects.”