888 Holdings, owner of betting giant William Hill, has announced the launch of a strategic review for its US B2C operations, noting it could consider selling part or all of the business.
As per the announcement, the strategic review launches on March 6, with 888 to consider “potential alternatives” to deliver value for the group. Moreover, in line with these plans, 888 has also mutually agreed to end its partnership with Sports Illustrated (SI). Known for its eponymous sports magazine, SI had entered the online betting market in an exclusive deal with 888 in 2021 in a bid to entice fans.
The partial or the full sale of US B2C operations are just some of the alternatives considered during the review. The business will also consider a controlled exit of US B2C operations and other possible strategic transactions. 888 notes that the review will not impact its existing B2B arrangements in the US.
888 has not set an end date for the strategic review. However, 888 CEO Per Widerström said shareholders could expect an update towards the end of March, when the company publishes its full-year results for 2023.
“Since commencing my role as CEO I have been focused on ensuring the group is set up to deliver strong value creation in the coming years,” Widerström said. “In the US, the intensity of competition and requirement for scale means huge investment is required to reach profitability.”
“The strategic review of our US B2C operations will continue at pace. I look forward to updating shareholders on our plans for the wider group in late March,” he added.
Presently, 888 operates in four states. While the 888 brand is exclusively available in New Jersey with 888casino, its collaboration with Authentic Brands Group (ABG) extends its reach to other states. Under the Sports Illustrated brand, 888 runs sportsbooks and online casinos in Michigan (SI Sportsbook and SI Casino), Colorado, and Virginia (SI Sportsbook).
The group says the gross profit margin in the US is lower than the group level. This reflects “significant” direct costs of operating in the market including duties, market access fees, and license fees. The company also noted intense competition from “well-capitalized incumbent participants”.
Under this basis, 888 has determined its current structure will not optimize returns, ultimately leading to the launch of a strategic review for the US-facing operations and the decision to terminate its partnership with ABG.
888 agreed to pay $25 million to ABG in cash from available resources and an extra $25 million between 2027 and 2029. According to 888, this is expected to result in operating cost savings of approximately $6 million to $7 million per year in 2024 and 2025.
“Our partnership with Authentic has consistently driven strong demand for the SI brand across both consumer experiences and product offerings,” Widerström said. “A series of record-breaking months for SI Casino has underscored the strength of the SI brand.”
“However, despite these successes, we have concluded that achieving sufficient scale in the US market to generate positive returns within an accelerated timeframe is unlikely,” he concluded
At the beginning of the year, the group reported an 8% drop in revenue for 2023 to £1.71 billion ($2.1 billion). 888 said this was driven primarily by a proactive mix shift away from dotcom markets. The group said this impacted revenues by approximately £80 million in 2023.
Additionally, the gambling giant said it has initiated a £30 million ($37.9 million) cost-saving program to support higher marketing spend through 2024, although investments will still be made in the area of AI-powered data and insights.
Original article: https://www.yogonet.com/international/noticias/2024/03/06/71134-888-considers-selling-its-us-b2c-business-terminates-partnership-with-sports-illustrated
