Ladbrokes owner Entain has revealed it expects to be hit with a large fine by the UK tax authority over historic corporate misconduct at its former Turkish online betting business.
An investigation that HMRC has been working on since 2019 has been handed over to the Crown Prosecution Service, the UK’s public prosecutor, Entain said on Wednesday.
Entain is now negotiating a deferred prosecution agreement with UK authorities which is likely to result in a “substantial financial penalty”, it added.
Analysts at Morgan Stanley estimated that the cash flow from Entain’s former Turkish business during the ownership period between 2011 and 2017, when Entain operated under the name GVC, amounted to about £230mn.
But they noted that the fine may be lower, because it may not relate to all historic activity in Turkey and the discount for full co-operation with UK authorities could be up to one-third of the possible fine.
The HMRC probe relates to “potential corporate offending” at the gambling group’s former Turkish subsidiary Sportingbet, according to Entain. Most of the offences fall under section 7 of the Bribery Act, which relates to instances where a company has failed to prevent an individual bribing another person or entity on their behalf.
Initially, the HMRC investigation focused on wrongdoing by third-party suppliers to Entain’s Turkish subsidiary over payment processing, but it was later widened to include entities and former employees within the subsidiary.
Entain sold its Turkish business in 2017 ahead of its £4bn takeover of Ladbrokes, which created the UK’s biggest high street bookmaker.
Barry Gibson, Entain chair, said the group was “keen to achieve a resolution to what is an historical issue”, adding that it had taken “decisive action” in recent years to improve corporate governance.
“The board and leadership teams have been overhauled, 100 per cent of our revenue is now from regulated or regulating markets, and our business model, strategy and culture have been reviewed, analysed, and stress-tested,” added Gibson.
Shares in the London-listed group were down 2 per cent to £13.45 in early morning trading.
The sale of GVC’s Turkish business caused controversy at the time after it emerged that the then-chief executive Kenny Alexander had sold Sportingbet to IT service provider Ropso Malta, which was part-owned by a businessman who co-owned a stud farm with Alexander in Scotland.
Because the offences are historic, analysts do not expect the investigation to affect Entain’s UK gambling licence. Collectively, Entain and GVC have been fined a total of £22.9mn by the Gambling Commission for consumer protection and anti-money laundering failures.
Both HMRC and the CPS confirmed they were in the process of DPA negotiations with Entain, but did not comment further on the case.