Britain's Secret Google

Betfair, the online betting exchange,

is targeting an autumn stock market listing valuing the company at about £1.5bn, I [Mark Kleinman] have learned.

I understand that Betfair held detailed talks earlier this week with its advisers at Goldman Sachs and Morgan Stanley about a plan that would see the company catapulted straight into the FTSE 250 as early as September.

It would be a landmark moment for a company dubbed ‘Britain’s secret Google’ and which was founded just 11 years ago. And it would provide a platform for Betfair to lead the consolidation of the online gaming market.

As I understand it, Betfair’s shareholders will not formally decide to press ahead with the flotation until after the summer break. It will undoubtedly take into account the performance of other IPO candidates, one of which – Fairfield Energy – cancelled its listing this week, before taking a final decision.

One person close to the betting exchange told me today that Betfair was “95 per cent certain” to announce an IPO in September. A flotation would give the company access to capital to accelerate its expansion, both internationally and by moving into other areas that use similar exchange technology. 

In one sense, as a tech company with no obvious listed peers, Betfair could be compared to another business experiencing a rather torrid ride as it prepares to go public: the online grocer Ocado.

The similarities between Betfair and Ocado are merely superficial, however. For one thing, Betfair recorded earnings (before interest, tax, depreciation and amortisation) in the year to April 30 2009 of just over £70m. That was on sales of about £300m – a very healthy margin indeed. Ocado, by contrast, has yet to make any money.

I’m told that Betfair, which abandoned an attempt to float in 2005, would be unlikely to use its listing to raise new money by issuing new shares but that some of the existing investors would seek to reduce their shareholdings.

Four blocs of shareholders each own about a quarter of the company, comprising: Ed Wray and Andrew Black, Betfair’s founders; Softbank, the Japanese bank; a group of venture capital investors including Balderton Capital; and company employees.

Betfair declined to comment.