888 Holdings’ UK Operating License Under Review Amid UKGC Concerns Over FS Gaming Investment
On Friday, July 14, the UK Gambling Commission (UKGC) revealed that it is currently reviewing UK operating license of global online casino, sportsbook operator and William Hill owner 888 Holdings, which is linked to 6.6% stake in 888 acquired by FS Gaming Investment, an investment group that reportedly includes previous executives of GVC, now known as Entain.
In addition, following the disclosure, the value of 888 shares fell by 26%.
License consideration:
In a statement, published by 888 on Friday, July 14, the UKGC explained the reason for the review, saying: “The review was due to FS Gaming’s investment and its proposal to shake up 888’s management with a new chairman, chief executive officer and chief financial officer.” Furthermore, the company said: “We had broken off talks with the prospective leadership trio in the light of questions from the industry regulator about their previous roles at rival gambling firm Entain, which is the subject of an HM Revenue and Customs investigation into alleged offences including bribery.”
However, the statement continues period of turmoil that started in January, when 888 ousted longtime CEO Itai Pazner amid an internal investigation into non-compliance with anti-money-laundering processes. Since then, the company has been looking for new management and it looked like the company seemed to have luck with FS Gaming, as FS Gaming purchased 6.6% of 888 in June and proposed to appoint Lee Feldman as president and Kenny Alexander as CEO, again their former roles at Entain, with previous Entain senior independent director Stephen Morana as head of finance. All of this led to UKGC taking an interest.
Deffered prosecution agreement:
The regulator highlighted “Entain’s admission that it was in talks with the Crown Prosecution about a deffered prosecution agreement, relating to alleged offences including bribery in its Turkish operations, during the period when Alexander, Feldman and Morana were at the company.” Relatedly, Entain said in May that “it was likely to incur a substantial financial penalty as a result of the investigation, which also involves HMRC.”
Moreover, Alexander, one of the former CEOs, was also punished 1,000 dollars during 2021 for taking a takeaway driver’s van that was parked in front of a kebab shop during a night out. But, this is thought not to have been taken into account in the watchdog’s involvement mentioned above. On that note, 888 said: “The Gambling Commission had asked to be kept informed of discussions with the men.”
UKGC warning to 888 Holdings:
The watchdog’s letter to 888 displays that “it subsequently warned the company that its license could be at risk if the FS Gaming proposal moves forward.” What’s more, the regulator said: “We wanted to know if any of the trio were suspects in the HMRC investigation, had been interviewed under caution or were suspects in any other investigation.” In this regard, 888 Holdings added that it “had asked FS Gaming for any information that could help allay the regulator’s concerns but that the most basic assurances that addressed these concerns were not forthcoming. The Gambling Commission had advised that anyone seeking a leadership position would require a personal licence and that the regulator would consider the existence of an ongoing criminal investigation. It strongly recommended that the board, as well as all shareholders, give very serious consideration to the above factors before acting.” However, there is no suggestion of wrongdoing by any of the three men.
Full cooperation:
Speaking about cooperation with the regulator’s intervention, Jon Mendelsohn, Labor peer and executive chairman of 888, said: “We will be fully cooperating with the […] 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 [Gambling Commission], 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 chief executive, the board is finalizing its appointment and expects to make an announcement in the very near future.”
Commenting on the now terminated talks with 888, a spokesperson for FS Gaming said: “We were completely surprised by 888’s statement and perplexed by how the company has orchestrated this as we remain relatively small public shareholders with no access to any non-public information and we were engaged in dialogue regarding the best strategy to maximize the value of these world-class assets. We will continue those efforts.”
UKGC rules:
The regulator is understood to have started to inquire about FS Gaming after news reports mentioned the possibility that it was working with HG Vora, another shareholder with over 10% in 888. And according to its rules “the emergence of a party with a combined 10% stake constitutes a change of control at a licensed gambling operator, requiring a licence review.” Additionally, the 888 license would be automatically canceled if the change of control was not validated.
In this regard, the Gambling Commission said: “We do not talk about individual operators. In general, if any operator requests information on existing regulations then we will provide that as part of our drive to make gambling fair, safe and crime-free.”