CVC looking at takeover bid for Betfair

CVC Capital Partners, the private equity group that took a bath on its ownership of Nine Entertainment last year, is considering a takeover bid for gambling group Betfair - another venture associated with James Packer.

The UK-listed shares of Betfair jumped 12 per cent on Monday after CVC, which also owns formula one racing, said it was in talks with a Betfair investor about making a bid for the group valued at £800 million.

CVC said it had "preliminary discussions with Richard Koch, Antony Ball and partners regarding options in respect of Betfair, which could include an offer for Betfair by funds advised by CVC together with Richard Koch, Antony Ball and partners". Mr Koch holds a 6.5 per cent stake in Betfair.

Betfair acts as an online exchange that allows punters to bet against each other, rather than against Betfair, which takes a cut of each transaction.

Betfair has disappointed as a listed stock after an overhyped public offering 2½ years ago. Despite Monday's boost, the stock is still trading 40 per cent below its flotation price.

Betfair's Australian operations are owned in a joint venture with Mr Packer's casino operator Crown Ltd.

Mr Packer sold most of Nine and its related assets to CVC Asia Pacific for about $5 billion in cash and debt in 2007.

CVC crystallised a loss of about $2 billion last year when it was forced to hand Nine to its creditors after the media group's heavy debt load left it on the verge of collapse.

Crown reported a $3.1 million profit on its share of Betfair last year, which included a GST refund. The previous year Crown reported a $2.5 million loss on Betfair.

The Australian business has suffered from a dispute over how much it should pay for thoroughbred racing product.

It has claimed that a fee based on percentage of turnover unduly affects the business, which operates on a lower margin than other wagering businesses.

The main parties who have actually benefited from Betfair's local operations are rival online bookmakers such as Tom Waterhouse and Centrebet.

Legal proceedings Betfair launched in the Federal Court in 2008 led to the lifting of a ban that prevented bookmakers advertising in states where they were not licensed.

This opened the floodgates on advertising and sponsorship of the AFL and rugby league, which is now generating so much controversy.