Shares in William Hill owner 888 plunged as the gambling watchdog launched another review into the firm — which the bookmaker warned could lead to fines or potentially its British gambling licence being revoked — over the involvement of ex-Entain boss Kenny Alexander after he led a group that bought a stake in the business.
888 also revealed it has ended talks to make Alexander its new boss, which it is hoped will make the odds of a licence revocation or suspension extremely slim.
FS Gaming, a group led by Alexander and involving a number of other former Entain executives, took a 6.6% stake in 888 in June, prompting the William Hill owner’s share price to surge. FS reportedly aimed to place Alexander in the CEO’s seat at 888, which had been empty since Itai Pazner left in January when 888 launched an internal investigation into the firm’s money laundering checks for Middle Eastern high-rollers.
888 confirmed today that FS had presented such a plan to its board.
Alexander built a small gambling business named GVC into the multi-billion-pound firm that is now known as Entain, purchasing household names like Ladbrokes and Coral as well as “local heroes” abroad. He is widely seen as one of the most influential executives in modern gambling, and investors hoped his involvement would spark a turnaround for 888.
But he left the firm in 2020, amid questions about a continued connection to a former subsidiary of GVC in Turkey, which the business sold as it aimed to get approval to buy Ladbrokes and Coral. Soon after his exit, Entain made a commitment to exit all “grey markets”, where the legal status of gambling is unclear at best, marking a clear break with the Alexander era. It originally planned to leave them all by the end of 2023, but later pushed back its deadline to leave the last one: Brazil.
Just days before FS revealed its shareholding in 888, the Ladbrokes owner revealed it could face a significant penalty because of an HMRC bribery investigation involving the Turkish business.
Now, 888 has said that the Great Britain Gambling Commission has conducted a review into its activities because of FS members’ role in the events that HMRC is looking into. 888 said this could lead to its licence being suspended or revoked, or a fine imposed “if the Commission finds that licence conditions have been breached, or that the operator, or relevant persons connected to the operator, are unsuitable”.
888 was already subject to the largest fine in British gambling history this year, over insufficient player protection and anti-money laundering measures at William Hill. The events that led to the fine occurred before 888 had bought the high-street bookie.
888 said it had asked Alexander’s group to provide more detail about their potential connections to the HMRC investigation, but it failed to do so to a satisfactory level.
“The group requested clarification from FS Gaming in relation to considerations expressed by the GBGC, but the most basic assurances that addressed these concerns were not forthcoming,” it said.
“The group will co-operate fully with the GBGC in its licence review.”
Given that it believes FS members have “no reasonable prospect” of getting approved by the Gambling Commission, 888 said it terminated talks over their appointments.
“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,” it said.
It’s hoped that, with the appointments rejected, chances of licence revocation would be very slim.
888 shares crashed today, closing down 25.2% to 79.6p. They have been on a volatile journey this year, but are only down around 10% from the start of January.
Lord Mendelsohn, Executive Chair of 888, said: "We will be fully cooperating with the GBGC'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 GBGC, 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.”
Investec analyst Roberta Ciaccia said: “Losing its UK licence would be disastrous for 888 – UK&Ireland generated c60% of the group’s EBITDA in FY22 on a proforma basis.
“As such, we think FS Gaming will not push for a seat on the 888 Board and believe it should make a public announcement to dispel any doubt.
“With the company still fully operating in the UK, a new CEO expected to be announced soon, and what we regard as a clear and reasonable relaunch plan laid out, we see no reason why the shares should not recover significantly once this situation becomes clearer.”
