CVC offer unlikely to turn heads at Betfair

CVC may have a few hurdles to jump if it wants to impress at Betfair. Photograph: PA

If CVC, the private-equity house, is going to make the board of Betfair feel uncomfortable it will probably have to offer at least 10 a share. Its opening shot of 880p, worth 910m, isn't going to turn heads among the small group of Betfair shareholders whose support it needs. Ed Wray, one of Betfair's founders, sounds underwhelmed. "I'm not entirely surprised the board has rejected it, to be honest," he says.

CVC may grumble that 880p represents a premium of 25% to Betfair's share price before the bid speculation started. So it does, but the betting exchange is not on its knees and in search of a deep-pocketed rescuer. It has a newish chief executive, Breon Corcoran, whose strategy of concentrating on regulated markets carries broad support. Nobody is crying out for a change of direction or arguing that Betfair needs to reinvent its business model.

Indeed, it is not even clear that CVC would wish to change Betfair's management. Instead its "big idea" seems to be the notion that the current strategy could, in some unspecified way, be executed more speedily as a private company. Is that really true, though? Betfair's shareholders are grown-ups: they are quite capable of looking beyond the next quarter's trading.

CVC's proposal, which involves a mix-and-match choice of cash or shares and loan notes in a new entity, could also be characterised as an invitation to the main investors to bank a few winnings and take a higher-risk punt with the rump of their holdings. If so, CVC needs to spell out how much financial leverage it would want Betfair to carry. Without that information, its first proposal is too vague, as well as too mean.