Camelot to buy GTech UK in Lottery bid

The lottery operator Camelot is to buy its software supplier, GTech UK, in an attempt to rescue its rejected bid to win the next licence to run the National Lottery.

The lottery operator Camelot is to buy its software supplier, GTech UK, in an attempt to rescue its rejected bid to win the next licence to run the National Lottery.

Camelot said last night that GTech's American parent company had agreed in principle to sell its entire British operation and its lottery terminals, after damning criticisms of GTech's trustworthiness by the National Lottery Commission, the game's regulator.

The move is an attempt by Camelot to outflank the commission. It rejected Camelot's licence application last week because GTech executives in the United States had covered up a long-standing software error that affected about 113,000 prizes, raising serious concerns about their reliability in the future.

A Camelot spokesman said: "We think this takes GTech out of the equation completely."

Camelot also added to the pressure on the commission by securing permission from the High Court in London yesterday for a judicial review of the decision to begin exclusive talks on the next licence with Sir Richard Branson's consortium, the People's Lottery.

The hearing, which is expected to last three days, was set for 15 September, but Mr Justice Elias disappointed Camelot by rejecting its application for a ban on further negotiations between the commission and the People's Lottery.

The judge said that allowing talks to continue between both parties would involve "very little prejudice" to the review's outcome. He added, however, that the commission would be expected to give Camelot an equal chance to improve its bid if it wins the judicial review.

His decision was welcomed by the commission, as it has given itself less than four weeks to finish refining Sir Richard's bid. He needs to find a guaranteed £50m fund to protect lottery ticket holders.

"It means we can continue talking with the People's Lottery, which is very important, because time actually is tight," a commission spokesman said.

Camelot believes thatbuying GTech will significantly strengthen its case at the judicial review hearing. It believes it answers the regulator's claim that it would take several months to meet its concerns over GTech's probity and proves it can control GTech effectively.

Camelot still faces a heavy fine in November over the software error cover-up, which broke its licence. The commission said last week the scandal raised "an unacceptable risk" that if Camelot won the next licence, it might be forced to shut down the lottery.

The deal to buy GTech UK, which is still being finalised, would involve Camelot taking over its 70 British staff, buying all the new terminals built for the new lottery licence and buying full rights to GTech's software systems. Camelot would not discuss the cost of the measure, but it paid GTech £28m last year for its supplies and services.

Despite Camelot's success in securing a judicial review hearing, the commission remains confident it can legally defend its conduct.

Sources at the commission confirmed that Dame Helena Shovelton, the commission's chairwoman, took exhaustive legal advice before deciding to give Sir Richard preferential treatment.