Pools merger set to kick-start a major revival

Oct 17 2007 by Tony McDonough, Liverpool Daily Post

Tony McDonough looks into the reasons why the Competition Commission allowed Littlewoods to merge with Vernons

SPORTECH’S proposed acquisition of the Ladbrokes-owned Vernons Pools operation took a giant step forward last week when the Competition Commission gave its blessing.

Walton-based Sportech, which already owns the Littlewoods and Zetters Pools brands, believes that adding Aintree-based Vernons to its operations could kick-start a major revival in a game that has declined rapidly in popularity since introduc- tion of the National Lottery in 1994.

Negotiations between Sportech and Ladbrokes are expected to con- clude in the next few weeks and one analyst claims that, as part of that deal, Ladbrokes may agree to allow Sportech to distribute its pools products in betting shops in the UK.

"When I win the lottery," has become the stock phrase of the saloon bar dreamer, but it’s easy to forget that just a few years ago the words uttered would have been "when I win the pools".

Such has been the cultural impact of the National Lottery, launched in a fanfare in November 1994, that no one seems to talk about football pools any more. Up until then the once-familiar pools coupon was filled in religiously every week by a quarter of the British population.

Stories of big winners were inter- spersed with tales of woe as occa- sionally some hapless punter would think he had won before realising he had forgotten to post the coupon. Even worse, the oor-step collec- tor had failed to submit it. But 1994 was the football pools’ Year Zero. After that the number of players declin- ed rapidly and many observers believed its demise was imminent.

However, as the century turned, the pools proved to be more resilient than many had thought. More than 800,000 people continued to fill in their coupons every week, genera- ting annual revenues of around £80m and with profits exceeding £20m, but there is a genuine belief the game has a long-term future.

Earlier this year Sportech and Ladbrokes began talks with a view to Sportech acquiring the Vernons brand. Sportech chief executive Ian Penrose believes bringing the two together is the best way of ensuring the survival of a game that is almost a British institution.

Sportech acquired the Littlewoods brand from the Moores family in 2000 in a deal worth more than £160m. Sir John Moores had started in the 1920s from tiny premises in Church Street and the revenue it generated allowed him to begin building what is now one of the best- known retail brands in the UK.

Sportech executives insisted Sir John’s legacy was safe with them, but when Mr Penrose arrived at the company early in 2006, he was dismayed at what he found.

The business was haemorrhaging cash. Two of its three main activities, the telephone betting operation Littlewoods Betdirect and an interactive gaming service on ITV, had cost the company around £60m in losses.

Mr Penrose took swift action. He sold off Littlewoods Betdirect and tore up the disastrous contract with ITV. A number of senior executives also left the business.

In an interview with the Daily Post earlier this year he said: "When I joined we had £115m of debt. It was apparent that things needed to be sorted out – and quickly.

"We have a football pools business that is the biggest in the world and yet when I joined it was clear it had no investment in either products or technology. Cash from it was being used to prop up the other two parts of the business and not being put to any sort of creative use."

MR PENROSE placed the pools, and other football- related games, firmly at the centre of Sportech’s turnaround strategy but he was known to be intensely irritated when the Competition Commission announced there would be an investigation into the proposed deal with Ladbrokes.

He believed the tie-up between the two biggest football pools brands in the country (between them they control more than 99% of the market with the tiny Brittens Pools the only other operator) was crucial to both the future of the pools and to Sportech itself.

Mr Penrose said this week: "Our stated aim has always been to re- vitalise the pools industry by build- ing on more than 80 years of heritage and by extending the product range to appeal to a new and younger audience. We want to extend the reach of the games, offering them through a greater number of outlets and therefore making them easier to play.

"By bringing in Vernons we can speak as one voice for the pools industry and the amount of investment we can then bring in will increase.

"Not only would Vernons be a great strategic fit but it would also allow us to build a thriving business here in Liverpool."

At the start of September the Com- petition Commission issued its pre- liminary findings saying it had found little evidence a merger would see a substantial lessening of compe- tition in the market. That assess- ment didn’t stop the Commission approving the takeover when it issued its final report last week.