Sunday, November 15, 2009

Carlyle Group & Camelot

British National Lottery operator Camelot is up for sale. The Carlyle Group is listed as a potential bidder. Camelot is currently owned by Cadbury, De La Rue, Thales, Fujistsu, and Royal Mail. Four of the five wish to sell, hiring Greenhill and NM Rothschild to sell their stake.

Carlyle did a deal with De La Rue in 2008. It purchased De La Rue's cash systems division, before the financial meltdown. Carlyle renamed it Talaris. They've broken new ground in how to sell cash dispensing and ATM machines.

New partners, new territories: might they do the same for Camelot? The De La Rue connection is tangential, although it might provide friends on the inside as any deal progresses. The bigger question is strategy.

Carlyle co-founder David Rubenstein is a skilled tea leaf reader. Might financially strapped state governments lease out their lottery franchise on the cheap? Rubenstein wants long term infrastructure deals with guaranteed cash flows and an asset held at the end of the lease, at least that's their Virginia Ports proposal. The Camelot bid document says:

that profits would benefit from the sale of Camelot expertise overseas, such as its deal in the summer to act as a consultant to the California State Lottery, with a suggestion that two further international contracts had been signed.

Might Rubenstein pick up Camelot to burnish Carlyle's lottery street cred? To think the Carlyle Group can leech off more than a citizen's tax money. It could soon make a profit off their visions of King or Queen for a day.