GVC gives away Turkish business
GVC has given away its Turkey business, hoping the move will help smooth its takeover of Ladbrokes after GVC’s lenders baulked at its exposure to a country where internet betting is illegal.
GVC had agreed on Nov. 2 to sell its business in Turkey for as much as 150 million euros ($186 million), before it struck the much bigger Ladbrokes deal worth at least 3.1 billion pounds ($4.3 billion).
But in the Feb. 9 prospectus for the Ladbrokes deal, which runs to several hundred pages, GVC said it was waiving its payment for the sale and would instead book a 46 million euro loss on the disposal to a company called Ropso Malta.
Ropso is backed by individuals that GVC said had provided IT services for its Turkish business. It was incorporated five days before GVC announced the sale of its Turkish assets to the company, according to Maltese company filings.
A Reuters analysis of the documents for the Ladbrokes deal shows Ropso took control of the Turkey unit for free on Dec. 21, two days after the disposal officially completed.
Ropso had agreed to pay for the business in monthly instalments over five years, deferred to start after the second month following completion. But GVC decided instead to quickly extract itself through a so-called clean-break notice.
GVC Chief Executive Kenny Alexander conceded in November that ownership of the Turkish business, which generated around a quarter of GVC’s earnings in 2016 according to Reuters data, had been an issue in his firm’s on-off talks with Ladbrokes and that selling it was “clearing the path” for the potential deal.
A spokesman for GVC said it had decided to waive the expected fee in order to ensure the merger with Ladbrokes completes on schedule.
“It was going to take too long, and Ladbrokes and GVC had agreed that there wouldn’t be a recommended merger (if GVC did not quickly exit the Turkey business),” the spokesman said.
Although internet gambling is illegal in Turkey, its citizens can still access services offered by companies based in offshore locations like Malta. But such setups are coming under increased scrutiny by the Turkish government, whose Finance Minister Naci Agbal for instance spoke out last September against online gambling websites and warned citizens to avoid them.
A loan agreement between GVC and lenders Deutsche Bank and Nomura shows the Turkey business remained a source of discomfort for its banks even after the sale to Ropso was agreed.
In the document, disclosed as part of the Ladbrokes takeover, GVC agreed it would not service any of its debt to the two lenders with “cash received directly” from the Turkey sale.
The GVC spokesman said some of its lenders had “preferred not to recognise revenue from Turkish online gaming activities”.
Nomura and Deutsche Bank declined to comment.