Lottery buyers seek concessions on deal
€405m purchase price won’t deliver a profit, say industry insiders, as concerns grow that charities may be squeezed
SERIOUS doubts are being expressed about the Government’s ability to secure the €405m it expects from the sale of the National Lottery unless it gives “major concessions” to its new operators.
While negotiations are due to be concluded within weeks on the terms of the operating licence, industry analysts have told the Sunday Independent that the Department of Public Expenditure and Reform would either need to reduce the amount the lottery gives to charitable causes or reduce the prize fund to leave room for a profit to be made.
“The numbers as they are now just don’t add up,” one industry analyst said, referring to the €405m bid put forth by the consortium of UK lottery giant Camelot and An Post for the 20-year operating licence.
The analyst, who declined to be named, said the consortium, known as Premier Lotteries Ireland, would need to achieve year-on-year growth of between five per cent and 15 per cent on its 2012 sales of €700m just to break even on its initial €405m investment at the end of the 20-year period.
While it remains to be seen what concessions, if any, Premier Lotteries secure from negotiations on the terms of the operating licence, Fianna Fail finance spokesman Michael McGrath called on the Government to “hold a firm line” on the matter.
Speaking to this newspaper, he said: “On the face of it, €405m seems to be quite a high price and you would have to wonder what the operators will have to do to extract that value back from it.
“This is a commercial investment by An Post and Camelot and they will be determined to get a strong return.
“The Government will have to hold a firm line during the contract negotiations and not concede ground on the key issues of the amount going to good causes and the amount of prize money paid out.
“The proceeds from the sale are badly needed and everyone welcomes the boost it gives to plans for a new children's hospital.”
He added: “We will be keeping a very close eye on the negotiations and will put pressure on the Government to get the best possible deal.”
The Fianna Fail TD’s concerns in relation to the Camelot/An Post consortium’s potential demands were echoed last night by our industry analyst.
“The only way I can see the €405m investment paying off for them is if the Government allows them to reduce the 65 per cent net contribution the National Lottery is required to make to good causes presently or if they reduce the prize fund, which is set at 56 per cent of sales.
“There’s little room for manoeuvre on the cost base and the new operator is required as part of the licence conditions to put new technology in place for the National Lottery within 18 months of taking over.”
Contacted by the Sunday Independent and asked if the Camelot/An Post consortium was in the process of seeking any such concessions from the Government, a spokesman for Camelot’s Canadian owners — the Ontario Teachers’ Pension Plan (OTPP) — said there would be no comment on the matter “while the terms of licence are being finalised”.
Premier’s bid of €405m is understood to have taken its competitors for the National Lottery operating licence by surprise, given the relatively small size and value of the Irish market. Only three years ago, OTPP paid €460m — or just €55m more — to buy Camelot in the UK where a far larger population delivers a £6bn (€7bn) turnover.