06 March 2024 , 11:58
742
0
William Hill's owner, 888, is considering pulling out of the consumer sports betting market in the US.
The company has put its business-to-consumer US arm, which mainly operates as SI Sportsbook and SI Casino, up for review. This could lead to a sale of the division, a "controlled exit" from the market, or other possible "strategic" deals.
The firm announced it is ending its partnership with Authentic Brands Group, which had given it exclusive use of the Sports Illustrated brand in the US for online betting and gaming. This decision will cost 888 a 25 million US dollar (£19.7 million) exit fee and another 25 million dollars (£19.7 million) to Authentic Brands between 2027 and 2029.
However, it will also result in cost savings of around 6 million to 7 million US dollars (£4.7 million to £5.5 million) per year in 2024 and 2025. This comes less than three years after 888 announced it was entering the US consumer market through a partnership with Authentic Brands to take advantage of a sports betting boom in the country.
The group admitted it faced stiff competition from established rivals and would need to invest significant money into the business, citing the need to pay duties, market access fees and licence fees among other costs. The boss of 888, Per Widerstrom, said: "In the US, the intensity of competition and requirement for scale means huge investment is required to reach profitability."
Teachers, civil servants and train drivers walk out in biggest strike in decade
He added: "Our partnership with Authentic has consistently driven strong demand for the SI brand across both consumer experiences and product offerings. A series of record-breaking months for SI Casino has underscored the strength of the SI brand."
Despite these victories, he admitted that they're facing challenges: "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. The strategic review of our US B2C operations will continue at pace, and I look forward to updating shareholders on our plans for the wider group in late March."
The first time we heard about the partnership between SI brand and 888 in USA was in June 2021. They've got a presence in four different states with various offerings like SI Sportsbook and SI Casino in Michigan, SI Sportsbook in Colorado and Virginia, and 888casino in New Jersey.
The review doesn't affect the business-to-business side of things at all, that's still running smoothly. Shares rose by more than 3% in Wednesday morning trading.
James Wheatcroft, a super smart analyst at Jefferies, pointed out that: "The US has long dragged back profitability and lacked the resources to effectively compete against heavyweight competition. The announcement tallies with our recently observed step-change in urgency at 888 cost savings programme, investment in marketing and AI stemming from the appointment of new CEO Per Widerstrom."
Further details are expected when 888 updates on its financial and strategic targets on March 26, according to Mr Wheatcroft.