888 has announced that it will be conducting a strategic review of its US B2C operations, as the group has concluded that “achieving sufficient scale in the US market to generate positive returns within an accelerated timeframe is unlikely”.
As part of this strategic process, 888 will consider all potential alternatives that can deliver value for the business, including the sale – in whole or in part – of the group’s US B2C business, the controlled exit of US B2C operations or other possible strategic transactions.
888 is active in four US states – SI Sportsbook and SI Casino in Michigan, SI Sportsbook in Colorado and Virginia, as well as 888casino in New Jersey.
The group is conducting a US operation strategic review because of a “lower than the group level” gross profit margin in the US due to “significant direct costs of operating in the market including duties, market access fees and licence fees”, as well as “intense competition from well-capitalised incumbent participants”.
888 noted that it does not believe that its current structure will optimise returns.
In addition, as a result of the strategic review and the above evaluation, the group will be mutually parting ways and ending its partnership with Authentic Brands Group, which had granted 888 the exclusive use of the Sports Illustrated brand for online betting and gaming.
As part of the termination, 888 has agreed to a $25m fee, to be paid in cash from available resources, as well as an additional $25m between 2027 and 2029.
The group stated that the termination of the Authentic Brands Group deal is expected to result in approximately $6m to $7m operating cost savings per year in 2024 and 2025.
Per Widerström, CEO of 888, commented: “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. In the US, the intensity of competition and requirement for scale means huge investment is required to reach profitability.
“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.
“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.”
No timetable has been set by 888 for the completion of the strategic review. The group added that “there can be no assurance regarding the results or outcome of the review” and that its existing US B2B arrangements are unaffected.
888 isn’t the only operator to announce a significant change to its US operations over the past couple of months. Last November, following its own strategic review, Kindred Group stated that it would be fully exiting the North American market by the end of the second quarter of 2024, subject to the regulatory process.