igamingnext photo
The former owners of BetCity have submitted a €104m counterclaim against Entain amid an ongoing legal dispute.

Dispute background

In January, it was revealed that Entain had initiated legal proceedings against the former owners of BetCity after agreeing to acquire the brand in June 2022.

Entain alleged that BetCity’s owners had concealed an investigation being carried out by the Netherlands Gambling Authority (KSA) in the lead up to the acquisition.

The former owners were accused of covering up the investigation by signing warranties stating that the business faced “no pending or ongoing proceedings” against it.

BetCity was subsequently hit with a €3m fine for AML and CTF failings, and an additional €400,000 fine for breaching marketing regulations.

Entain therefore sought “significant damages” from the firm’s former owners, including the costs of rectifying regulatory breaches, the associated increased regulatory risk, and the hit to the company’s reputation.

In February this year, the former owners of BetCity were given an extended deadline of 19 March to submit their defence in the dispute, which is being litigated in the UK Commercial Court.

Last week on 18 March, Entain revealed that it believes BetCity’s failure to disclose regulatory risk prior to the acquisition led to damages to the company of between €58m and €156m.

Counterclaim says Entain knew about investigations

Today (25 March), it was reported by Dutch-focused gambling news portal Casino Nieuws that BetCity’s sellers are seeking almost €104m in damages from Entain in a counterclaim.

The sellers claim that Entain had knowledge of the KSA investigations taking place at the time of the acquisition, and decided not to alter any of the terms of the share purchase agreement despite having the opportunity to do so.

The BetCity team informed Entain of the ongoing investigations in November and December 2022 via email, telephone and at an in-person meeting, according to the counterclaim.

On 10 December, Entain made clear in a letter to the former owners that it was concerned about the investigations.

According to the claim, that meant Entain had the opportunity to make changes to the share purchase agreement before completion of the acquisition in January 2023, had it wished to do so.

Crucially, the former BetCity owners also said the investigations only resulted in two “relatively modest one-off fines,” and denied that the fines put the company’s operating licence at any risk of suspension or revocation.

Diminished value

Further, the former owners claim that Entain has made adjustments to BetCity’s operations since acquiring the business, leading to a worse financial result than anticipated and therefore a lower earnout for the sellers than would otherwise have been owed.

Despite Entain suggesting in August 2023 that the brand had been performing as expected in H1 following completion of the acquisition, BetCity revenue fell 12% over the course of the full year.

The brand therefore generated €22.2m less than projected as part of the earnout agreement, the counterclaim said, resulting in a loss to the company’s sellers of €82.9m.

The sellers are also seeking an additional €21m employment tax adjustment payment, bringing the total damages sought to €103.9m.

Similar posts