Arena stabilises the ship as Sportech merger talk resurfaces.

Byline: By Howard Wright 

AS SPECULATION circulates the racing scene about a merger between Arena Leisure and Liverpool-based pools company Sportech, which may even include Northern Racing, Arena chief executive Mark Elliott has ushered in 2009 on a note of "reduced pessimism".

Arena issued a profits warning last October, when Elliott told shareholders that the outlook for the full year had fallen below expected levels, but in presenting a pre-closed period update yesterday, he reported that trading since had been "in line with expectations".

He said: "The good news is there is no further bad news. In the last quarter the ship has been stabilised, which couldn't be said for the first three quarters of the year.

"We're not getting carried away, and this year is going to be tough for everyone, but the measures we have taken since last autumn and our performance up to and after Christmas give me cause for reduced pessimism."

Arena, which will announce its full-year results on March 19, helped its overall financial position last month by selling the freehold interest in the caravan park and marina at Windsor racecourse, making around pounds 1.7 million.

Elliott was at pains to outline the state of Arena's debt in yesterday's statement, revealing that at the year-end, excluding interest-free loans of around pounds 6.6m from the Levy Board, the company's interest-bearing loans added up to pounds 38.2m, which he described as being "well within its total available bank facilities of pounds 61m".

The subject of debt could explain why the not-infrequent rumour about a link-up between Arena and Sportech has resurfaced, given that the opportunity to bring together the two quoted companies has been more than a possibility since chief executive Ian Penrose left Arena in October 2005 for a similar role at Sportech, which has since scooped up the football pools market through ownership of Littlewoods, Vernons and Zetters.

Merging the two companies would result in a change of control, with a subsequent opportunity to reorganise their combined debt in a new economic market.

The key to the puzzle is the stance of Grand National-winning owner Trevor Hemmings, who through various vehicles is the major shareholder in both Arena (with 41.09 per cent) and Sportech (28.6 per cent).

Whether Northern Racing would find itself in the mix is less likely, according to City sources yesterday.

Although there is an obvious link, since Northern's owner, the Reuben Brothers, is the second biggest shareholder in Arena, with 20.53 per cent, the business reasons for forging a link at this particular time are not regarded as overwhelming, even though the prospect of a merger at some time remains.