888 terminates FS Gaming talks over historical GVC Turkish operations concerns
London-listed operator pulls plug on proposal, which put Kenny Alexander forward as CEO, following Gambling Commission licence review into 6.6% stake in the business
888 has terminated discussions with activist investor FS Gaming Investments over concerns regarding GVC’s historical Turkish operations.
The London-listed firm confirmed FS Gaming, which had built up a 6.6% share in the business, had proposed appointing former GVC boss Kenny Alexander as CEO.
The proposal also put forward appointments for Lee Feldman and Stephen Morana to become chair and chief financial officer (CFO), respectively.
However, 888 said it had been in discussions with the Gambling Commission (GC) in relation to FS Gaming’s shareholding and proposal.
The group’s share price has slumped more than 21% following the disclosure.
The GC has subsequently expressed concerns relating to the ongoing HMRC investigation into GVC’s historical operations, a period when the proposed senior leadership team were in situ at the operator.
The HMRC investigation relates to offences that include, but are not limited to, section 7 of the Bribery Act 2010.
On 31 May, Entain (previously known as GVC) confirmed it had entered deferred prosecution agreement negotiations with the Crown Prosecution Service in relation to the case.
Entain said the review of the former Turkey-facing business was ongoing and it acknowledged that historical misconduct involving former third-party suppliers and former employees may have occurred.
888 said it had considered all potential risks related to this fact, including reviewing information from historic discussions between William Hill and GVC.
The GC has requested regular updates from 888 in regard to the developments on the FS Gaming proposal so that it can “fully execute its responsibilities” as a regulator.
888 proceeded to request clarification from FS Gaming in relation to these concerns raised by the GC.
However, 888 said the “most basic assurances that addressed these concerns were not forthcoming”.
The GC has since informed 888, on 14 July, that it had decided to commence a review of the firm’s licences under Section 116 (2)(c)(ii) of the Gambling Act 2005.
Section 116 (2)(c)(ii) states the GC may review any matter connected with the provision of facilities for gambling as authorised by an operating licence if the Commission “for any reason thinks that a review would be appropriate”.
The review is in relation to FS Gaming’s investment in 888 and the proposal.
888 said it would fully cooperate with the GC in its review.
The licence review could allow for a range of outcomes, including “immediate suspension, revocation of operating licences, or the imposition of licence conditions or financial penalties if the Commission finds that licence conditions have been breached, or that the operator, or relevant persons connected to the operator, are unsuitable”.
As a result of the licence review, and in conjunction with public information and the 888 board’s due diligence process, the operator has concluded that the leadership appointments put forward have “no reasonable prospect of being approved by the GC at this time”.
888 added that “any actions by FS Gaming to effect a change of corporate control would likely put the group’s licences to operate in the UK at immediate and significant risk”.
The 888 board has therefore unanimously concluded to terminate discussions with FS Gaming.
Lord Mendelsohn, 888 executive chair, said: “We will be fully cooperating with the GC’s Section 116 (2)(c)(ii) review, arising from potential issues with respect to FS Gaming’s investment and proposal, and look forward to bringing the review to a conclusion expeditiously.
“As a board we devoted significant time to considering FS Gaming’s proposal. However, following in-depth regulatory due diligence including engaging closely with the GC, the board had no option but to terminate discussions as it simply could not put licences in our largest market at significant risk.
“While this engagement temporarily interrupted the very thorough search process to appoint a new CEO, the board is finalising its appointment and expects to make an announcement in the very near future.
“The board remains firmly focused on delivering the group’s clear strategy to unlock shareholder value and I’m pleased to confirm that the business remains on track to deliver market expectations for 2023 adjusted EBITDA,” he added.