By Cliff Williams, ContributorIT HAS now become apparent that the government has made a definite decision to transfer the promotion of live horse racing into private hands.
Last week, Fitz Jackson, Minister of State in the Finance Ministry spoke about a time line of about two months when the Government's proposals would become a reality.
In the meantime, as I understand it, there are several possible investors demonstrating an interest already and it will be interesting to see what is to be offered by the government.
FACTORS TO CONSIDER
This type of investment given the nature of the business is unique in our business environment and there are two factors to consider in terms of the value of the assets.
Firstly, the net value of the real estate and racing plant itself must of necessity be high cost items, and one wonders which of sale, least or lease/sale will be put to tender.
Secondly, the goodwill attached to this particular going concern, which has a monopoly on totalisator wagering and is solely involved in the promotion of live racing is likely to be offered at a hefty price and therefore will be an expensive acquisition.
As things stand, purchasing of the land and racing plant is not likely to be an attractive proposition for the potential investors given the primitive profile of the 44-year-old facility.
For all I know, a lease/sale option may not even be that attractive or viable for the reason stated above so a long-term lease is what I would expect to see emerge in any offer.
I find it quite a fascinating exercise to speculate on what formula is going to be used to determine the value of the assets to be divested. Clearly the divestment figure is almost certainly to be substantial and what is also fascinating is how this is likely to be received amongst the possible investors.
HIGH PROFILE PERSONALITIES
At the moment speculation is rife as to which group of investors is likely to succeed in its bid. So far as I understand it, there are a couple of high profile personalities looking quite capable of putting together the substantial finance requirement.
Given the fiercely competitive environment the question must arise as to whether or not the promotion of live horse racing is currently a viable business proposition and this must have an impact on the fairly imminent divestment arrangements.
ATTRACTIVE PAYOUTS
Truth be told, the competition from lotteries and numbers games, offering far more attractive payouts has had a serious negative impact on the profitably of the promoting company. The advertising blitz of the lottery companies has had the desired brainwashing effect in the marketplace and the purveyors of wagering on horse racing have been found wanting as the numbers games increase in popularity each month.
Getting back to possible divestment arrangements, a key element of any agreement is going to be the government's approach to taxation of the business going forward. There has to be a departure from what prevails currently as it is generally agreed that the percentage take from gross sales is too great and affects directly the economic viability of the promoting company.
At the beginning I speculated that 2003 could be the year when the racing industry commences a swift sure climb to modernisation and economic viability and with nearly seven months gone the signs are indeed hopeful and I see no reason to be anything other than optimistic about the future.
