Ongoing legal battle sees Entain claim that BetCity's valuation has fallen by up to €156m
London-listed operator suggests a potential 32% decrease in 2024 NGR for Dutch operator amid potential regulatory woes and a decline in ARPU
Entain has claimed BetCity’s former owners’ failure to disclose regulatory investigations has resulted in damages of between €68m and €156m for the FTSE 100 operator.
The claim represents the latest twist in the ongoing legal battle between Entain and seven members of the Singels family, former BetCity CEO Melvin Bostelaar and ex-marketing director Robert Kooiman.
In January, it was revealed that BetCity failed to disclose a number of regulatory reviews of the business as Entain was proceeding with acquiring the Dutch operator.
As detailed in court documents, first reported by Dutch language industry new site Casino Nieuws, Entain said the difference between BetCity’s current value and its value at the time the acquisition was agreed will be determined by an external expert.
Entain agreed to acquire BetCity in June 2022, with an initial €300m shelled out in January 2023 as part of a deal that, originally, could have cost Entain up to €850m.
Entain said the €68m-€156m in damages was based on “increasing the weighted average cost of capital (WACC); and adjusting the value of future cash flows”.
In terms of WACC, the court documents point to increases in risks including “legal and regulatory, business, operational, and reputational”.
The claims noted that those increased risks could therefore lead to “challenges for [BetCity]”.
Those challenges, according to Entain, include higher cash flow volatility, lower than expected growth rates, an increase in the probability of facing regulatory sanctions and a reduced market share in the Netherlands.
Using the WACC method to determine the damages, the claim suggests an increase from 10% to 12.5% would result in the BetCity’s value reducing by €124m. A smaller increase in the WACC to 11% would result in BetCity’s value dropping by €58m.
In respect of future cash flows, the claim argues that the actual NGR in 2024 for BetCity could be between 28% and 32% lower than previous forecasted NGR.
The document notes this reduction “accurately reflects the impact of the AML and/or regulatory measures”.
Entain also said the expected NGR reduction was based on an anticipated decline in BetCity’s market share due to increased competitions, an assumed reduction in VIP customers and a reduction in OPEX costs to reflect a more “conservative business model”.
Using this methodology, BetCity’s value would decrease by between €136m and €156m.