Entain Initiates Legal Action Against Former Owner, Alleging Undisclosed Violations in BetCity Acquisition

Entain, the global sports betting and gaming company, has initiated legal proceedings against Sports Entertainment Media (SEM), the previous owner of BetEnt (BetCity), following Entain's acquisition of the brand in 2022. The acquisition, valued at $484.2 million, was announced in June 2022 and finalized after a six-month process. Entain alleges that SEM, along with members of the Singels family and former executives of BetCity, failed to disclose crucial information related to two inquiries by the Dutch gambling regulator, Kansspelautoriteit (KSA), for non-compliance involving BetCity.

The legal action revolves around events preceding the acquisition in 2022. Entain contends that BetCity's executives, despite being aware of the violations, did not report them in formal documentation. One of the KSA investigations focused on BetCity's practice of sending promotional emails to young adults, resulting in a €400,000 ($433,000) penalty. Another investigation addressed anti-money laundering (AML) and counter-terrorism financing violations, leading to a €3 million ($3.2 million) fine for BetCity.

While news of the lawsuit surfaced in January, recently published documents shed light on the case. Entain's legal filing states its claim for damages is based on breach of warranty and breach of covenant concerning the purchase of BetEnt from SEM. In November 2022, Entain became aware of the KSA investigations involving BetCity. Subsequently, Entain and SEM reached an agreement, wherein SEM would cover any fines related to the probes. Entain also retained the option to make additional claims against the former owners for breaching the warranty.

Entain argues that the undisclosed issues should have influenced the acquisition price, potentially resulting in a lower purchase amount. However, specific details regarding the damages claim have not been publicly disclosed.

The legal action highlights the complexities involved in mergers and acquisitions within the gambling industry, emphasizing the importance of transparent disclosure during such transactions. The outcome of this case will likely shape future considerations for companies involved in similar acquisitions and underscore the significance of comprehensive due diligence in such dealings.

By fLEXI tEAM