Entain Finalises Payment Agreement To CPS Over Historic Turkey Case

Entain has reached a Deferred Prosecution Agreement (DPA) in principle with the Crown Prosecution Service (CPS) over historic activities in Turkey. The agreement comes after an HMRC investigation into Entain’s historical Turkish business, which had been ongoing for several years. The DPA, which requires judicial approval, will involve Entain paying a substantial financial penalty, disgorgement of profits, and making charitable donations. The company aims to put this case behind it and move forward as a responsible and regulated operator in the gambling industry.

Entain, previously known as GVC Holdings, owned a Turkish subsidiary called Headlong Limited from 2011 to 2017. The business was later sold to Ropso Malta Limited. However, reports persisted that Entain continued to benefit from its Turkish operations, despite repeated denials. This led to an HMRC investigation, which initially focused on obtaining additional information related to online betting and gaming operations.

In 2020, HMRC widened the scope of its investigation to cover potential corporate offending, including alleged violations of the Bribery Act 2010. Entain acknowledged that historical misconduct involving former third-party suppliers and employees of the group may have occurred. The company, however, denied any connection between its former payment subsidiary Kalixa, the collapsed German company Wirecard, and the Turkish operations.

Entain has now reached a DPA in principle with the Crown Prosecution Service (CPS) regarding the historic activities in Turkey. The terms of the DPA are in line with the provision announced on August 10th. Under the agreement, Entain will pay a financial penalty of £585.0m, which includes the disgorgement of profits. Additionally, the company will make a charitable donation of £20.0m and contribute £10.0m to CPS and HMRC costs. These payments will be made in instalments over a four-year period from the date of final court approval.

The DPA, which is voluntary, will fully resolve the investigations into matters related to Entain’s own business. It is important to note that the agreement does not absolve former executives or employees from potential charges. The settlement covers alleged offences under Section 7 of the Bribery Act 2010, which requires businesses to have proper procedures in place to prevent bribery.

While Entain announced a record H1 2023, its Q3 November report highlighted a slowdown in online net gaming revenue (NGR) growth. The company’s financial future may depend on how this DPA will affect its licenses in other markets, such as its joint venture with MGM Resorts in the United States. Entain’s share price experienced fluctuations following the news of the DPA, reflecting investors’ uncertainties about the potential impact on the company’s operations and expansion plans.

To mitigate any financial risks, Entain has implemented Project Romer, which aims to achieve an online EBITDA margin of 28% by 2026 and 30% by 2028. The company plans to simplify its operations, improve cost efficiencies, and make cross-cost savings of £100m by 2025.

The HMRC investigation and subsequent DPA have led to significant changes within Entain. Former CEO Kenny Alexander stepped down prior to the investigation, and Shay Segev was appointed as his replacement. However, Segev soon moved on to become the CEO of sports streamer DAZN. Jette Nygaard-Andersen took over as the CEO of Entain.

Entain also shifted its place of management and control from the Isle of Man to the UK, resulting in a change in its tax residence. The company underwent a rebranding process to emphasize its commitment to responsible gambling and differentiate itself from its previous operations as GVC Holdings.

Entain’s future prospects will be closely monitored, considering the potential consequences of the DPA on its licenses and expansion plans. The company’s joint venture with MGM Resorts in the United States has already gained significant traction, with operations in more than 26 states. However, the DPA’s implications for the joint venture and future M&A activity remain uncertain.

Despite the challenges, Entain remains committed to operating only in regulated markets and maintaining the highest levels of corporate governance. The company aims to continue its journey as a responsible operator in the gambling industry, building on its reputation as a best-in-class organization.

The Deferred Prosecution Agreement between Entain and the Crown Prosecution Service marks a significant development in the company’s efforts to resolve the HMRC investigation into its historic activities in Turkey. The agreement involves substantial financial penalties, disgorgement of profits, and charitable donations. Entain aims to put this chapter behind it and move forward as a responsible and regulated operator. As the company navigates the potential impact on its financial position and licenses, it remains committed to operating in regulated markets and maintaining the highest standards of corporate governance.