GVC Boss Offloaded Controversial Turkish Ops to Friend and Business Partner for Free to Keep Regulators Sweet
Posted on: July 7, 2019, 01:28h.
Last updated on: July 7, 2019, 01:28h.
GVC CEO Kenny Alexander offloaded his company’s black-market Turkish operations to a long-time friend, Ron Watts, with whom he jointly runs a stud farm in Scotland, according to the UK’s Sunday Times.
It was widely reported at the time that the Turkish business – which once accounted for a third of GVC’s revenues – was given away gratis in 2017 in order to grease the skids on the company’s $4 billion takeover of Ladbrokes Coral, which completed in March last year.
Online gambling is illegal in Turkey and GVC had been using shady cash-collection networks and payment processors to hide transactions from Turkish financial institutions — an arrangement it feared would not go down well with UK regulators scrutinizing the Ladbrokes deal, or with potential financiers.
It was initially reported that the Turkish arm, known as Headlong Ltd, would be sold for $186 million to a little-known company called Rospo Malta — an entity established that year by people who had provided IT services to Headlong.
Rospo proposed paying in instalments over a period of five years, but GVC decided this would take too long. It needed to rid itself of Headlong as quickly possible, and so it waived the fee completely.
Best of Friends?
But this is the first time the dots have been joined between Alexander and Rospo to reveal a personal relationship and existing business connection — and it’s a revelation that could prove to be awkward for GVC as it applies for licensing in the emerging US state-markets.
Watts is listed as one of three owners of Rospo, which has changed its name to Dochandoris. Together, he and Alexander are also listed as the sole owners of Kenron Ltd, which runs New Hall Stud Farm in Ayrshire, Scotland.
The partnership in the stud farm existed prior to the ownership transfer of Headlong.
According to The Times, Alexander and Watts have known one another for almost 20 years. They likely met in the early 2000s when they both joined online gambling company Sportingbet.
In May, when Alexander appeared in front of the Nevada Gaming Control Board in search of a license in America’s gambling capital, regulators zeroed in on the company’s former Turkish ops, describing employment of a payment processor that disguised gambling transactions as things like e-books and general goods as “active concealment.”
The board also berated Alexander because it said the Turkish business was so badly overseen that some of its employees were siphoning off money, and there was little GVC could do about it because the operation was illegal.
Stakes Are High
GVC squeaked through to gain a provisional license in Nevada, which will be reviewed after two years.
But with a $400 million partnership in place with MGM Resorts, it can ill afford such narrow scrapes as it seeks to conquer the newly liberalized US sports betting markets.
Alexander left Sportingbet to join GVC as CEO in 2007 when it was a tiny company with just seven employees. When William Hill acquired Sportingbet in 2012, it didn’t want to touch the Turkish business, and a burgeoning GVC took on the back-market ops.
Now, GVC is one of the biggest online gambling companies in the world. And while it once made around half of its revenues from unregulated or illegal markets, 92 percent now come from regulated markets, according to The Times.
But the company wouldn’t be where it is today without the gray and black markets, however much it tries to offload its past.