Online gambling company Betfair raised its profit forecast and cost savings target yesterday, making its case for independence as it tries to stave off a $1.4 billion takeover by private equity firm CVC Capital Partners.
Betfair last month rejected a potential offer of 880p per share from CVC, saying the price was too low and had too many strings attached.
Chief executive Breon Corcoran, who joined from Irish bookmaker Paddy Power last year, declined to comment directly on the takeover but said his strategy was beginning to pay off.
Under Corcoran, Betfair has withdrawn from markets such as Greece and Germany where regulations are not clear cut or tax rates punitive and has cut 500 jobs as part of a £30 million cost-saving programme.
Betfair’s technology allows gamblers to bet online against one another at their own prices. It is also offering more conventional sports betting with odds set centrally to compete with rivals in an expanding yet highly competitive sector.
“The business is making excellent progress. We had a stronger than expected finish to FY 13 and momentum is strong,” Corcoran told reporters.
“Recent performance indicates that our strategy is working and that the combination of the exchange and sports book can be very potent,” he added.
CVC, the largest shareholder in Formula One motor racing, believes that it could turn Betfair around more quickly by taking it private. It often leaves management in place once it has done a deal.
CVC has joined forces with investors Richard Koch and Antony Ball who own 6.5 per cent of Betfair. It has until May 13 to make a formal offer, although this deadline can be extended.
The company floated in 2010 at a price of £13 per share. The stock has tumbled since then, with analysts saying the company had failed to clearly identify whether it was a technology or gambling business.
Analysts welcomed the statement from Betfair which was hurriedly compiled after its financial year ended on April 30.
“Management has made a good case for the defence with encouraging early signs of the strategy paying off in the UK and opportunities from regulatory changes in Italy, Spain and the US,” said Ivor Jones of Numis Securities. He increased his recommendation on the stock to “Buy” from “Add” and set a price target of 1,100p.
Betfair forecast underlying profit of £73 million on revenues of £387 million for the year to end April. Previous guidance had been for profit of £65-70 million and revenues in a range of £370-385 million, the company said.
Betfair raised its cost savings target to £30 million from a previous £20 million. (Reuters)