The legal showdown between Entain and the erstwhile proprietors of BetCity persists. The former is alleging damages ranging from €58 million to €156 million ($63-$169 million). Entain used two distinct methodology to quantify these damages, as reported by Casino Nieuws.
To contextualise, in a massive deal worth $482 million in January 2023, Entain had taken over BetCity. This landmark procurement facilitated the gambling operator’s entry into the Dutch market, thereby extending its foothold in Europe.
However, shortly after, Entain stumbled into issues with the Kansspelautoriteit (KSA), the Dutch gambling watchdog. It transpired that, prior to its acquisition by Entain, BetCity was dealing with a couple of non-compliance inquiries. As a result, BetCity was ultimately compelled to shell out €3.4 million ($3.7 million) in regard to anti-money laundering and advertisement-related contraventions.
Entain formerly charged that the previous owners of BetCity failed to correctly reveal specifics pertaining to the ongoing inquiries, leading to financial repercussions for the acquiring firm. Consequently, Entain instigated a legal confrontation.
Entain, at present, is pushing for reparation, arguing that the undisclosed regulatory infractions by BetCity have adversely affected their operations.
Entain Claims the Penalties Adversely Affected Its Operations
Interestingly, Entain adopted two distinct methodologies to estimate the damages inflicted by the alleged nondisclosure of information by BetCity’s former owners.
The first approach involved the firm considering the projected increase in legal, business, and reputational risk. As a result of these escalated risks, the company encountered increased cash flow instability and decelerated growth, the firm contended. What’s more, they now face the possibility of more intensive regulatory oversight in the future due to these sanctions.
Entain also underscored that the penalties could impinge on its market share, thereby adding to its woes. The firm stated that these penalties from the KSA led to a rise in the weighted average cost of capital (WACC) to 12.5%. To provide some context, BetCity’s WACC was pegged at 10% prior to the merger, this increase could potentially signify a staggering €124 million ($134.5 million) depreciation in valuation.
For the second estimate, Entain underscored a potential decrease in cash flow. Entain speculated that the KSA probes could have resulted in a cash flow reduction of between 28 and 32%, triggered by skyrocketing customer acquisition expenses and a decrement in revenue.
Moreover, the VIP segment took a hit as premium customers curtailed their expenditure.
Interestingly, it seems that BetCity could soon find itself on the auction block as Entain mulls over selling off some of its brands. Though the sale hasn’t been officially established yet, the company is purportedly considering divestments that would consolidate its business operations.
