Further developments have surfaced in the ongoing legal dispute between Entain Plc and Sports Entertainment Media BV regarding the deal valuation of BetCity.nl.
On 19 March, Sports Entertainment Media BV and related parties submitted a counterclaim to the High Court of Justice of England and Wales demanding €104m in compensation from Entain.
The counterclaim, put forward by the Singels family and former executives Melvin Bostelaar (CEO) and Robert Kooiman (CMO), disputes Entain’s assertion that BetCity.nl was worth €156m less than assumed due to undeclared regulatory investigations at the time of its acquisition for €450m in January 2023.
At the core of the dispute is the claim that Entain was aware of compliance investigations carried out by Kansspelautoriteit (KSA), the Netherlands Gambling Authority, during the M&A process undertaken between 2022 and 2023.
In 2022, Entain finalized an agreement to purchase BetEnt BV, the entity behind BetCity.nl, which holds a KOA license in the Netherlands, for a total valuation of €850m. Initially, Entain acquired the shares of Sports Entertainment Media BV with a €300m cash payment.
The deal also included performance-based incentives worth €550m . These incentives would increase Entain’s total acquisition cost to over €800m, but only if BetCity.nl managed to achieve an EBITDA that was 10 times its value for the fiscal year 2023.
However, in 2023, BetCity.nl incurred a €3m penalty due to substantial non-compliance with the Dutch Wwft, the Money Laundering and Terrorism Financing Prevention Act. Entain has alleged that these violations were deliberately concealed by Sports Entertainment Media BV and associated parties.
BetCity.nl’s former owners contend that Entain was informed of ongoing compliance investigations via emails, phone calls, and meetings with leadership during the period of November to December 2022.
Following the acquisition of BetCity, Entain implemented operational changes to comply with Dutch regulations. These changes, deemed unnecessary by Sports Entertainment Media BV who assert that BetCity was already in compliance with Dutch laws, resulted in a revenue shortfall of €22m and an €83m loss for them.
Therefore, the counterclaim asserts that Entain applied a compromised valuation to BetCity.nl’s post-acquisition performance, effectively denying the former owners their performance rewards, believed to be around €104 million.
The High Court of Justice of England and Wales is set to hear both cases, with court dates yet to be scheduled. As disclosed to investors, Entain has set aside £40m for compliance costs in its H1 2024 accounts to address upcoming regulatory changes in the UK and the Netherlands.
The board of the FTSE 100 firm has appointed a Capital Allocation Committee to review the brand portfolio, funding, and operating structures to enhance financial performance and corporate value in the best interest of shareholders.
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