Our lottery will soon be owned by a bunch of Canadian teachers, after the Ontario Teachers’ Pension Plan, a huge Canadian pension fund, won the battle for National Lottery operator Camelot. Assuming the regulator gives the deal the green light, Teachers will pay £389m for the company, which holds the licence to run the lottery for the next nine years (with the option to extend that by five). UK private equity firm CVC Partners apparently tried to beat them to the punch by playing on the current anti-foreign ownership sentiment – but we reckon a Canadian pension fund may be a safer bet than a UK leveraged buyout specialist…
Camelot isn’t actually any stranger to foreign ownership – French firm Thales is one of the five firms in the consortium that currently controls it, alongside De La Rue, Fujitsu, Royal Mail, and (ironically) Cadbury. Now it’s up to the National Lottery Commission, the lottery regulator, to decide whether Teachers is a ‘fit and proper’ owner – which will presumably mean seeking reassurances that it will continue to push admin costs down and keep ploughing money into its four original target areas: the arts, sport, heritage and charities.
CVC’s strategy appears to have been to play on the ‘British owners for British companies’ sentiment stirred up by Kraft’s acquisition of Cadbury. Ex-Cadbury boss Sir John Sunderland had apparently been lined up as chairman, with rowing hero Sir Matthew Pinsent earmarked for a non-exec position, to highlight its role in backing London 2012. It had even lined up state-owned RBS and Lloyds to finance the bid (which, rumour has it, was actually higher than that of Teachers).
However, the Canadian fund seems to have convinced that it would be a better long-term bet. And to be honest, we’re not surprised. As a pension fund, Teachers has different priorities to the likes of CVC – it wants steady, predictable returns from its direct investments, which is why it buys a lot of infrastructure assets (and why the Lottery, a reliable cash cow, is an ideal target). It already owns a wide range of UK assets, including stakes in Northumbria Water and Birmingham and Bristol airports, plus Acorn Care and Education, a special needs schools provider. And with reported assets of more than CA$100bn, it’s hardly a fly-by-night merchant.
Teachers’ rumoured expansion plans for the Lottery may get more complicated after the Election, since the Tories have already talked about trying to reform the way it allocates money. But we’re not too worried about its takeover of Camelot. The lottery is pretty well regulated, so room for manoeuvre is limited. And although the CVC bid may have kept the company in British hands, pension funds tend to work on a longer-term investment horizon and seek a less aggressive return. We shall see.
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