FS Gaming reduces stake in 888 as deal with Shay Segev called off

An agreement between FS Gaming Investments and Shay Segev which saw the DAZN Group CEO transfer voting rights to his shares in 888 Holdings to the firm has been cancelled.

Subsequently, FS’ control of its shares in 888 now stands at 4.5% – the firm’s total shareholding in 888 amounts to 6.5%, with the stake having only been acquired in June 2023, but the group does not retain voting rights over the remaining 2.5%.

FS is the investment vehicle of Kenneth Alexander and Lee Feldman, the respective former CEO and Chairman of GVC Holdings prior to its rebranding as Entain Plc in 2020.  The Leadership tenure of Alexander and Feldman saw GVC Holdings execute the transformative deal of acquiring Ladbrokes Coral, to establish a new FTSE100 gambling firm. 

Segev worked alongside both Alexander and Feldman on GVC/Entain’s c-level team as Chief Operating Officer between 2016 and 2020. 

He then assumed CEO duties at GVC in 2020 and steered the re-brand to become the inaugural CEO of Entain, before stepping down to be replaced by incumbent Jette Nygaard-Andrsen in the leadership position of the FTSE100 group.

His transfer of voting rights to FS came shortly after 888 ended discussions with the fund in relation to a potential change of leadership and strategic direction, which would have seen Alexander and Feldman appointed as CEO and Chairman.

The context around this is significant and could affect both Entain and 888. HRMC is currently investigating a legacy Turkish division of GVC, Headlong, which was terminated back in 2017 in order for GVC to complete its acquisition of Ladbrokes Coral. 

Although the closure of the business pre-dates its rebrand, Entain expects a substantial financial penalty from HMRC as a result of the Turkish-facing brand’s discrepancies. 

As a result of the HMRC investigation and the association between FS and its leadership with GVC’s legacy operations, 888’s operating licence was put under review by the UK Gambling Commission (UKGC).

This prompted 888 to end the aforementioned discussions with FS’ regarding the future of its senior management – today’s LSE filing revealing a downsizing of FS’ share in 888 could well be a continuation of this distancing between the two firms.

Entain, meanwhile, announced that it had reserved a  ‘£585m legal provision’ in preparation for such enforcement action following its H1 trading results this month. 

The provision somewhat overshadowed the revelation of a strong six months of trading for the company, with revenue increasing 14% to $2.4bn (H1 2022: £2.1bn). 

Following the earnings call, Chairman Barry Gibson and Nygaard-Andersen emphasised to investors that the company had changed significantly since its rebranding from GVC.

“The Entain of today bears no resemblance to the GVC of yesterday, which had a different management team, a different strategy, and to be blunt, different standards,” Gibson remarked.

“Over the last few years, we’ve taken very deliberate steps to drive a complete transformation to become a best-in-class responsible operator with outstanding corporate governance.” 

Entain enters a critical H2 trading period, in which investors have demanded that the FTSE gambling group outline its plans on a multi-billion merger with MGM Resorts, the US venture partner of BetMGM.

Back in 2021, amid the boom days of US wagering’s post-PASPA market, the board of Entain rejected a $11bn merger with MGM Resorts, citing that “the offer undervalued the long term prospects of its business”.

Despite its regulatory headwinds, Entain notes strong progress on its US developments as the BetMGM venture remains on track to hit “the upper end of FY23 NGR guidance between $1.8-$2bn”.