Betfair to release cash after float plan shelved - Monday 28th of November 2005

ONLINE betting exchange Betfair is drawing up plans to release cash to some of its shareholders to compensate for shelving its proposed £1bn flotation.

Betfair chairman Sir Robert Horton is considering setting up an internal market that would allow the existing shareholders to buy each other out. Other plans include paying a large dividend to all the shareholders, to ease pressure to push ahead with a float.

A group of US venture capitalists own a sizeable stake in the company and are believed to be itching for an exit.

A fund controlled by LVMH boss Bernard Arnault also owns around 10%, and is thought to be keen to trim its holding as well.

Although the float had been planned for the first quarter of next year, it is now unlikely before 2007.

Betfairs biggest shareholders are its founders Ed Wray and Andrew Black, who hold almost 30% between them.

They are believed to be happy to wait until they can prove the long-term value of the company.

The company has no need to raise new money to fund its global expansion as it generates huge amounts of cash. The flotation was always designed to give shareholders an exit.

Horton has been running the company on a day-to-day basis since chief executive Stephen Hill quit last month, in response to the IPO being postponed. Hill has retained a stake worth about £10m.

It is understood that no moves have been made to find a long-term replacement for Hill, indicating that the float is still a long way off.

There is also no replacement lined up for the former finance director, Owen ODonnell, who was ousted shortly after the float plans were announced over the summer because he lacked experience of running a listed company.

The company has also been waiting for its tax position to be clarified before pressing ahead with the float.

Traditional bookmakers are lobbying for Betfairs customers to be taxed on their winnings - which the company is fighting tooth and nail.

The situation is expected to be clarified in the Chancellors pre-budget report, which is due on December 5.

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