The Board of 888 Holdings has confirmed this afternoon that it has terminated all ongoing discussions with FS Gaming Investments LLC.
FS Gaming is the investment vehicle of former GVC Holdings (formerly Entain Plc) leadership duo Kenneth Alexander (CEO) and Lee Feldman (Chairman) – who last month acquired a 6.5% stake in the LSE Gambling Group.
Further to the investment, Alexander and Feldman had propositioned 888 governance to lead a turnaround of the business, which has seen its share price tumble since acquiring William Hill’s UK and European business last year.
FS Gaming had proposed the appointments of Lee Feldman, Kenny Alexander, and Stephen Morana, to serve as Chair, CEO, and CFO of 888.
However, 888 confirmed that the UK Gambling Commission had expressed concerns due to the ongoing HMRC investigation into GVC’s former Turkish subsidiary of Headlong. The investigation is yet to be concluded, but Entain’s corporate governance believes that it will likely face a ‘substantial financial penalty’, the exact amount of which is yet to be determined.
HMRC’s investigation of GVC’s Turkish affairs is specifically related to the tenure of the proposed appointees, made by FS Gaming.
Of consequence, the UKGC has decided to review 888’s operating licenses due to the concerns and “lack of adequate assurances from FS Gaming”.
The UKGC has indicated that it may apply its strictest measures on the 888 Holdings licence, including an immediate suspension, revocation of operating licenses, or imposition of license conditions or financial penalties.
As such the board of 888 decided to terminate discussions with FS Gaming due to the risk posed by the license review to 888’s operations and earnings in the UK.
888 notified investors of factors and determinations outlined by the Gambling Commission related to corporate governance and the management of investments.
The Commission cited that the acquisition of more than “10% stake in the business constitutes a change of corporate control, which requires its approval”. If the change is rejected, the only recourse is the revocation of the license, and this decision cannot be reversed once implemented.
The board was further informed, “that any licence applicant or operator relevant to such application should consider what role relevant individuals may have had at the time relevant to the ongoing HMRC investigation into GVC.”
Responding to developments, Lord Mendelsohn, Executive Chair of 888, stated, “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.”