The Sunday Telegraph - Business & Money
National Lottery bidders head for the final draw
An oligarch who has a joint venture with Gazprom and Camelot, now owned by a Canadian pension fund, are favourites, says
Sir Hugh Robertson and Sir Keith Mills used to be close colleagues. They braved the media frenzy of the London Olympics together as sports minister and deputy head of the games organising committee, delivering a success in the face of high pressure and international scepticism, but the camaraderie of the 2012 campaign is now ancient history.
Today, the former allies are pitted against each other in one of the most intense and drawn out bidding battles in the City for years – the race to run the National Lottery.
Mills has thrown his lot in with Czech oligarch Karel Komárek, whose sprawling pan-european gambling business Sazka wants to seize control of Britain’s most lucrative single public sector contract. It is a decision that puts the 71-year-old at odds with his old pal Robertson, 12 years his junior and the chairman of Camelot, which has run the National Lottery for more than a quarter of a century.
Bids for the Fourth National Lottery licence, which runs for up to 10 years from 2024, were submitted late on Friday evening. Rothschild, the investment bank advising the regulator the Gambling Commission, will host bidders’ final presentations in its glass-fronted City office on St Swithin’s Lane between now and the end of the month. The next fortnight will be crucial for both men.
MND, Komárek’s legacy oil business, has a joint venture with Gazprom, the Russian stateowned energy company. He amassed his £4bn fortune by building his energy empire with a loan from his father before capitalising on the fall of Communism after 1989.
Komárek has sought to win support from politicians rather than just the Gambling Commission, even though the regulator will pick the winner.
It is a tactic that all bidders will have employed to a greater or lesser degree, while also navigating strict rules that prohibit lobbying on the specifics of each party’s bids. There is no suggestion that any party has breached the auction’s rules.
Sir Keith worked closely with Boris Johnson during his tenure as London mayor. Earlier this year, he was picked to lead No 10’s campaign to tackle obesity. Downing Street sources insist the pair have abided by the rules and not discussed the bid.
It is understood that the Sazka will unveil plans to donate some of its profits to a “levelling-up fund” during its presentation to officials next week, a pledge is likely to play well with Conservative backbenchers and the Prime Minister as part of the party’s effort to retain support within Red Wall across the North.
Last week a group of politicians criticised
Camelot over its record for raising money.
MP for Rother Valley, organised a letter from Conservative MPS to
Johnson “to highlight Camelot’s failings”. Almost 27p in every pound of sales was returned to good causes at the start of the most recent licence in 2011, but this has now fallen to nearly 21p.
“The founding principle of the National Lottery was to extend opportunity to areas of the country that were being left behind – to level them up,” Stafford said. “It’s time to get someone in who can run the National Lottery properly and who can be more true to its founding values.”
The intervention came as no surprise to the Camelot camp, with speculation that Komárek’s UK PR machine may have been behind the letter. A spokesman for Sazka did not respond to a request for comment.
However, Camelot cannot escape the fact that scratchcards have lower returns. Instant win games need to offer more
‘The founding principle of the Lottery was to extend opportunity to areas being left behind’
‘It will all come down to whether the Government wants an aggressive or conservative bid’
lucrative prizes compared with the main Lotto draw, meaning the charitable returns are lower.
But Camelot has long argued that scratchcard sales are complementary. They do not cannibalise main draw ticket sales, it is claimed. In absolute terms, the figures support such an assertion. Camelot raised nearly £1.9bn for good causes in its most recent financial year – an all-time record.
Komárek has also sought to bolster his UK bid with a series of high-profile appointments to an advisory board. Sir Keith is flanked by the likes of Lastminute.com founder Brent Hoberman and former Sainsbury’s boss Justin King, championing its tech and retail credentials respectively. Meanwhile Lord Coe, Robertson’s predecessor at the British Olympic Association, has joined Sazka’s board. Camelot’s appointments have been more subtle. Last week, it hired former No 10 spin doctor Lee Cain. Camelot has run the lottery since its inception in 1994, but this is the first time it has entered a tender under foreign ownership. The company was bought by the Ontario Teachers’ Pension Plan in 2010 – leaving it open to criticism its priority is to fund Canadian teachers’ retirements rather than the betterment of the UK.
Its ownership was previously seized on by Richard Desmond, the former owner of the Express and Star newspapers as well as Channel 5, who is considered an outsider in the bidding race. “I will make it bigger, better and British,” he has said in the past.
Desmond is one of two long-shot challengers alongside Camelot and Sazka. Onlookers say his bid has been damaged by allegations last year he used his influence as a Conservative party donor to lobby the Housing Secretary to rush through a property development in east London.
But those inside Desmond’s camp are believed to be extremely confident.
The final bidder is Sisal, which runs Italy’s Superenalotto and Matchpoint betting shops and is owned by buyout fund CVC. Plans are afoot to list a stake in the business in Milan. Although it has proved a formidable opponent to
Sazka on the Continent, those close to Sisal are understood to have conceded it has been too late to the bidding after unveiling its pitch this spring.
This weekend it has nevertheless launched a last-ditch effort, hiring West Ham United chief Lady Karren Brady – a former star of the BBC’S The Apprentice – to lead its advisory board. Other board members include former Asda chief executive Andy Clarke and Lord Vaizey, who served as culture minister under David Cameron.
Most believe the National Lottery tender has narrowed to a two-horse race. Komárek’s promises of rapid sales growth will appeal to some decision-makers and those who believe the National Lottery has become stale over the past decade.
Whitehall officials know that if they retain Camelot, the UK may struggle to run a competitive Lottery tender again. “It will all come down to whether the Government wants an aggressive or conservative bid,” says one source.
Despite Komerek’s ferocious campaign, Camelot remains the favourite – not least because of the civil service’s natural conservatism. Robertson looks likely to triumph over his old friend.