According to Ladbrokes Coral owner Entain, Dutch company BetCity is worth between €68 to €156 million less than the €450 million Entain paid when it acquired the operator in January 2023. The factors that led to this devaluation are what prompted Entain to begin a legal battle against BetCity’s former owner earlier this year.
The issue stems from investigations surrounding noncompliance with Dutch advertising and anti-money-laundering (AML) laws, with the first investigation having been ongoing when the sale and purchase agreement (SPA) between Entain and BetCity’s former owner was signed in June 2022. As outlined in a court document obtained by CasinoNieuws.nl, Entain alleges that the investigations undertaken by the Dutch gambling regulator, Kansspelautoriteit (KSA), were undisclosed by BetCity’s then owners, although they had signed documents ensuring otherwise.
BetCity’s Legal Troubles With the Dutch Gambling Watchdog
Betent, trading as BetCity in the Netherlands, first got in trouble with the KSA in April 2022, when the company was notified that the KSA was undertaking an investigation into potential breaches of advertising regulations. This situation was followed by an investigation into Betent’s compliance with AML laws, which commenced in May. The AML investigation uncovered various breaches, resulting in the KSA instructing Betent to address the issues in September and giving the company a three-month deadline.
According to the documents, Entain first learnt of Betent’s regulatory issues on November 15th, 2022. Several days prior, the KSA had announced that two “unnamed operators” had been caught breaching the Netherlands’ Money Laundering and Terrorist Financing (Prevention) Act (Wwft). After an Entain representative reached out to Mr Kooiman to confirm that the company was not one of the said operators, they were instead informed that Betent was indeed one of those companies.
The same month saw Entain being informed of the advertisement investigation that was ongoing at the time, but no clarification that the said probe had begun prior to the signing of the SPA was provided. In light of these circumstances, Entain requested that a Completion Date be set for early January 2023. In December 2022, Entain also made a Warranty Claim due to the prior issues of disclosure.
However, in April 2023, Betent was fined €400,000 for the company’s advertisement violations. In November, Betent was handed another fine, this time capped at €3 million, as a result of the case surrounding AML violations and the KSA determining that Betent had not complied with regulatory instructions.
The Regulatory Sanctions Severely Devalue BetCity’s Worth
The hit to BetCity’s reputation and potential future sanctions have made Entain reevaluate BetCity’s worth, and it took two approaches towards determining the operator’s decrease in value.
Entain’s first approach points to BetCity’s worth having been €124 million below the acquisition price due to increased business, operational, and reputational risks. Entain reached this figure by claiming that the potential of more regulatory trouble translates to an average cost of capital being capped at 12.5%, which would result in the €124 million figure.
Entain’s second attempt at estimating the hit to BetCity’s worth was based on the company’s future cash flows and their value, as BetCity’s prior owner had provided Entain with such a forecast. Entain’s own calculations point to a percentage of between 28% and 32% less than what Sports Entertainment Media BV had forecast in terms of Net Gaming Revenue (NGR). As a result, Entain believes BetCity’s value could be off by between €136 million to €156 million, with the lower figure being reduced to €68 million for now due to lack of clarity.
- Author
Daniel Williams
