BetCity's former owners have claimed Entain was not only aware of the KSA's investigations, but also severely impacted their earn-out.
The counterclaim against Entain has been submitted by BetCity’s former owners, which consists of various members of the Singels family. Also included are former CEO Melvin Bostelaar and former marketing director Robert Kooiman.
It comes in response to Entain’s original accusation that undeclared regulatory investigations at the time of the acquisition meant the Dutch-facing business was worth as much as €156m (£133m/$169m) less than assumed.
Entain acquired BetCity for €450m in January 2023, with the deal ultimately giving it access to the Dutch market. BetCity was one of the initial 10 licensees in the Netherlands.
However in January this year, Entain launched a compensation claim after details of two regulatory cases came to light. Entain said in the claim it was unaware of the investigations into BetCity when it acquired the business.
In a document obtained by CasinoNieuws.nl, Entain said BetCity’s former owners signed papers stating they were not aware of any ongoing regulatory investigations. The filing claims several personnel at BetCity knew of the cases but did not declare this information.
The Dutch gambling regulator Kansspelautoriteit (KSA) was leading both investigations.
Entain was “ultimately aware” of the investigations into BetCity
In the counterclaim, the plaintiffs accuse Entain of being aware of the investigations that were taking place. This was during the acquisition stage of 2022 and 2023.
The former owners of BetCity filed the counterclaim with the High Court of Justice in England and Wales on 19 March 2024. In total, it is seeking €143m from Entain Holdings (Netherlands) BV and Entain Holdings (UK) Limited.
The two investigations, which BetCity was informed about in April 2022, related to it sending promotional emails to young adults. This is in breach of Dutch law and resulted in a €400,000 fine.
The second investigation, launched in May 2022, referenced shortcomings with anti-money laundering and terrorist financing measures. BetCity was fined €3m for such failings.
In the counterclaim, the plaintiffs highlight that in November and December 2022, the BetCity team informed Entain of the ongoing investigations in several messages.
These included emails, telephone conversations and a meeting on 17 November 2022 regarding the two investigations that took place between the signing of the acquisition agreement in June 2022 and the deal’s completion in January 2023.
According to the counterclaim documents, it is understood that on 10 December 2022, Entain also made it clear in a letter that it was concerned about the two investigations.
Changes in BetCity structure resulted in lower earn-out
After the acquisition and the appointment of Vic Walia as CEO, Entain made several adjustments to BetCity’s business operations. According to Entain, these changes were made to act in accordance with Dutch law – which Entain claims BetCity was still in violation of.
However, the group of former owners (the plaintiffs), emphatically deny this in their counterclaim. It is claimed that on the date of the agreement and afterwards, BetCity was already acting in compliance with the WWFT, the Netherlands’ Money Laundering and Terrorist Financing Prevention Act.
Due to the adjusted business operations, BetCity earned €22m less after the acquisition than projected as part of the earn-out for the former owners. This resulted in a loss of €83m for the plaintiffs.
What happens next?
The High Court of Justice in the UK will hear both cases. While court dates have not been set for either case, this is likely to be a long and protracted saga.
Such has been the controversy around the case, rumours have begun to swirl about the possibility of Entain selling BetCity. Earlier in March, the Financial Times reported Entain could be open to a sale among multiple other assets.
The news comes following its full-year 2023 net loss of £936.5m, announced on 7 March in its annual earnings report.
Entain is understandably keen to reduce its asset exposure given the cost of its extensive acquisition campaign.
According to the Financial Times, operator brands not directly integrated into the company’s platform will be given priority for sale. In total, these accounted for close to a third of net gaming revenues in the first half of last year.
