Entain faces $739 million penalties after bribery probe over former Turkish subsidiary

Entain, the parent company of renowned betting brands Coral and Ladbrokes, is set to pay penalties totaling more than $739.2 million (£585 million) following an extensive probe into alleged bribery related to a former Turkish subsidiary. 

The company recently disclosed that it had reached an agreement with HM Revenue & Customs (HMRC), outlining the payment of $739.2 million in penalties and profits disgorgement.

Additionally, the company committed to donating $25.27 million (£20 million) to charity and covering HMRC's costs with an extra $12.64 million (£10 million) payment, as conveyed to shareholders.

The investigation, initiated by HMRC in 2019, scrutinized activities linked to a Turkish-facing business that Entain divested itself of back in 2017. This thorough investigation subsequently extended its scope to include the practices of the GVC Group, later rebranded as Entain. 

Allegations primarily centered on lapses in anti-bribery measures concerning both former employees and external suppliers associated with the Turkish subsidiary.

To address these looming penalties, Entain had already earmarked a provision of $739.2 million in August. The proposed agreement, yet to secure final court approval, outlines a payment plan spanning four years. If authorized, this plan would mark the culmination of the investigation and resolution of the case.

Chairman Barry Gibson highlighted the transformation within the company since the period under investigation, underscoring evolution from its past practices and noting the legacy matter "concerns a business which was sold by a former management team six years ago."

“The group has changed immeasurably since these events took place, and the DPA process has provided a reminder of the stark differences between the GVC of yesterday and the Entain of today."

This significant development comes amid mounting unrest among investors and stakeholders regarding Entain's performance and strategic direction. 

Two US-based activist hedge funds, Sachem Head Capital Management and Dendur Capital, have voiced apprehensions about the company's trajectory under CEO Jette Nygaard-Andersen, particularly amid industry challenges and declining market shares.

Entain's recent challenges encompass a range of setbacks, including diminishing sales in crucial markets such as the UK, attributed largely to stringent regulatory measures that have constrained online betting activities. 

The decline in market valuation by more than a third this year has intensified concerns among investors, especially when compared to the contrasting rise in competitor Flutter Entertainment's shares, which soared by 13% during the same period.