Racing: Sydney clubs commission study into merger proposal

Sydney's two race clubs are opposed to a merger unless it is part of wide ranging reforms of the NSW racing industry and say the economic benefits of such a move have been grossly exaggerated.

The Australian Jockey Club (AJC) and Sydney Turf Club (STC) commissioned their own study into a merger in response to a report by Ernst & Young undertaken on behalf of the NSW Government and presented it to Racing Minister Kevin Greene last week.

The LEK Consulting study estimates the benefits to the industry will be A$3.3 million per year, less than one quarter of that identified in the Ernst & Young report.

The clubs say those figures do not present a compelling case for a merger and have proposed that a Merger Benefits Team be set up immediately and report back later this year.

While acknowledging that change was necessary to achieve progress, the AJC and STC said a strong and robust racing industry could be founded on a new era of co-operation among government, Racing NSW, the race clubs and other stakeholders.

The STC said the Ernst & Young report was faulty in key areas in that it failed to highlight certain factors, including the costs of implementing the merger, the capital expenditure required and had no regard for the external factors which have affected both clubs, namely the leakage of wagering revenue to other states and corporate bookmakers.

The club also said that while it had taken on temporary debt to finance the ongoing construction of income producing assets, the debt-to-asset ratio was low and manageable.

It said the STC's internal review of the Ernst & Young report and the analysis by LEK determined there was no compelling financial argument to merge. "This is a great chance for the NSW racing industry to devise strategies and reforms that a merger alone would not solve," STC chairman Bill Picken said.

The AJC has undergone major changes in the past few months with the resignation of chief executive Norman Gillespie and senior executive Richard Freedman and a forced election of a new board of directors.

"Undertaking a merger review of the metropolitan clubs is only part of the story," the AJC statement said.

"A broader review to identify and capture all benefits across the NSW racing industry is required."

The AJC joined the STC in calling for the Merger Benefits Team to be established, comprising the chairmen and chief executives of the AJC, STC and Racing NSW, the administrative body.

Racing NSW is fighting a battle with corporate bookmakers over the payment of rights fees based on turnover.

Betting exchange Betfair and corporate bookmaker Sportsbet will challenge the Race Fields legislation in court in November.

Racing NSW chief executive Peter V'Landys said if the administrative body was successful, payment of the fees by corporate bookmakers and exchanges would result in a minimum of an additional A$30 million a year to the industry.

- AAP