Entain, the global gaming and betting giant, has filed a legal claim against the former owners of BetCity, a leading online gambling and sports betting operator in the Netherlands. The claim alleges that the former owners breached the warranty and covenant of the acquisition agreement by failing to disclose two investigations by the Dutch gambling regulator, the KSA, that were ongoing at the time of the deal.
Entain Acquired BetCity for €450 Million in January 2023
Entain, formerly known as GVC Holdings, announced its intention to acquire BetCity in June 2022, as part of its strategy to expand its presence in regulated markets. BetCity was one of the first 10 operators to receive a license from the KSA to offer online gambling and sports betting services in the Netherlands, which opened its market in October 2022.
The acquisition was completed in January 2023, with Entain paying €450 million ($484.2 million) for the Dutch brand. BetCity has been operating as part of Entain for over a year now, offering a range of products, including casino, poker, bingo, and sports betting, to its customers.
Entain Discovered Two Undeclared Investigations by the KSA in November 2022
However, in November 2022, Entain learned that BetCity was under investigation by the KSA for two separate cases of non-compliance, which dated back to 2022. According to Entain, the former owners of BetCity, Sports Entertainment Media (SEM), and some members of the Singels family, as well as former executives of the Dutch brand, signed documents stating that they were not aware of any ongoing regulatory investigations at the time of the sale.
Entain claims that this was a false statement, as several personnel at BetCity knew of the investigations but did not disclose them to Entain. The investigations related to breaches of the Dutch gambling law, such as sending promotional emails to young adults, and shortcomings in anti-money laundering and counter-terrorism financing measures. The KSA imposed fines of €400,000 ($433,000) and €3 million ($3.2 million) respectively for these violations.
Entain Seeks Compensation for the Breach of Warranty and Covenant
Entain filed a lawsuit against the former owners of BetCity on December 7, 2023, in the UK’s Commercial Court, seeking damages for the breach of warranty and covenant of the acquisition agreement. Entain argues that the undisclosed investigations should have affected the valuation of BetCity, and that it paid more than it should have for the Dutch brand.
Entain had previously agreed that SEM would cover the cost of the fines imposed by the KSA, but it also reserved the right to submit an additional claim for compensation. The details of the damages Entain is seeking have not been disclosed yet.
Entain has not commented on the case publicly, but it is expected to provide more information in the coming weeks. The former owners of BetCity have not responded to the lawsuit either.
Entain Faces Challenges in Its Global Operations
The legal dispute with the former owners of BetCity is not the only challenge Entain is facing in its global operations. The gaming and betting giant has recently lost its chief executive officer, Jette Nygaard-Andersen, who resigned in December 2023, after less than a year in the role. Entain has appointed Stella David, a non-executive director, as the interim CEO, while it searches for a permanent replacement.
Entain is also facing regulatory uncertainties in some of its key markets, such as Germany, where it has suspended its online casino operations due to the lack of clarity on the licensing process. Entain is also awaiting the outcome of the UK government’s review of the Gambling Act 2005, which could result in significant changes to the online gambling landscape in the country.
Despite these challenges, Entain remains confident in its growth prospects, as it continues to invest in new technologies, products, and markets. Entain is also pursuing a merger with its US partner, MGM Resorts, which could create a global leader in online and land-based gaming and betting.
