In a major strategic move, 888 Holdings PLC, one of the most recognized online gambling operators, has decided to divest its US online gambling assets and exit the US market entirely. The company recently reached an agreement to sell its US operations to Hard Rock Digital, a subsidiary of the well-known hospitality and entertainment brand, Hard Rock International.
This decision marks a huge moment for 888 Holdings, which has been actively operating in the US market for several years. However, with increasing regulatory complexities and intensifying competition, the company has opted to streamline its operations and focus on other key markets where it sees greater growth potential.
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What are the terms of this deal?
Under the terms of the agreement, Hard Rock Digital will acquire 888’s online gambling assets in the US, including its technology platform, customer base, and related infrastructure. This strategic acquisition positions Hard Rock Digital as a major player in the rapidly expanding US online gambling industry, allowing the company to leverage 888’s established presence and expertise in the market.
For 888 Holdings, the sale of its US assets represents a strategic realignment of its business priorities. By exiting the US market, the company can allocate resources more efficiently and concentrate on its core markets in Europe and other regions where it enjoys a strong market.
The finalization of this transaction is subject to regulatory approvals and other conditions, expected to be concluded in stages, potentially by Q4 2024. Following this divestment, 888 has initiated a controlled exit from its remaining US B2C operations, with plans to cease operations entirely in the region by the end of 2024, pending regulatory approvals.
The company anticipates significant recurring annualized benefits to EBITDA, starting from 2025 onwards, with a portion of these savings allocated for reinvestment into growth initiatives. These developments have been factored into the financial targets disclosed by 888 in March 2024.
Following its strategic decisions, 888 anticipates incurring net one-off cash costs of around £40m associated with its exit from the US market, including previously announced brand license termination fees, to be distributed across the years 2024 to 2029.
These moves come after 888 disclosed its financial performance for fiscal year 2023, reporting revenue of £1.71bn. This revenue growth was largely driven by the completion of the acquisition of William Hill earlier in 2023.
However, despite this revenue increase (not pro forma revenue), the company experienced a 25% decline in adjusted profit after tax, amounting to £48.1m. Additionally, 888 successfully concluded a review of its operating licenses by the Gambling Commission without incurring penalties.
Deal is a win for Hard Rock too!
Last year, Hard Rock Digital announced the launch of Hard Rock Games, its new business unit that will concentrate on the creation and management of its free-t0-play online and mobile games. With the 888 deal, this new business unit will benefit greatly from the improved in-house tech, as well as the operational and developmental capabilities that come with the partnership.
For Hard Rock Digital, the acquisition of 888’s US assets represents a strategic expansion of its online gambling footprint. By integrating 888’s technology and customer base into its existing operations, Hard Rock Digital aims to strengthen its position in the US market.
To this effect, last year, Hard Rock also announced that it was entering into a similar strategic partnership with Playtech. Under this partnership, HRD will license a range of Playtech’s proven technology solutions and iGaming content to deliver an authentic gaming experience across Hard Rock’s global network of entertainment, hospitality, and physical casinos.
In the US and Canada, HRD’s customers will access Playtech’s iGaming content, including leading slots, RNG, and live dealer table games, through HRD’s proprietary platform and technology. Additionally, HRD will utilize Playtech’s IMS player management platform and other software solutions, alongside ancillary services such as operational support, customer assistance, payment advisory, and marketing services, outside of the US and Canada.
Playtech will mainly provide its products and services through revenue-sharing agreements under long-term commercial contracts. Additionally, Playtech has made an investment of $85 million (approximately €80 million) in exchange for a minority equity stake in HRD.
The funds from Playtech’s investment will mainly support HRD’s ongoing global expansion efforts. Currently, Hard Rock’s online and retail sports betting and iGaming operations are active in several US states, including Arizona, Indiana, Iowa, New Jersey, Ohio, Tennessee, and Virginia, with plans for further expansion.
HRD also has ambitious plans to introduce its online sportsbook and iGaming offerings in select international markets in the coming years. Leveraging Hard Rock’s strong global brand and Playtech’s expertise in international markets, software, and services, the partnership offers a promising platform for international growth.
Plus, HRD’s extensive global presence across cafés, hotels, and casinos positions it uniquely for omni-channel opportunities on a global scale. Playtech, on the other hand, anticipates minimal impact on its B2B segment results for FY2023 from this partnership, with an expected increase in contribution to B2B revenues in FY2024 and beyond as HRD expands its presence in established markets and enters new ones.
Mor Weizer, Playtech CEO, expressed excitement about the strategic partnership, highlighting the strength of Hard Rock International’s global brand and management team. He emphasized that the collaboration aligns with Playtech’s B2B strategy, particularly in advancing its position in the North American market.
Jim Allen, Chairman of Hard Rock International and HRD’s Board, emphasized the partnership’s role in accelerating HRD’s global expansion plans and providing an authentic digital experience for Hard Rock’s global audience across various channels. Allen reaffirmed Hard Rock’s commitment to innovation in the gaming industry and expanding the “Hard Rock” experience worldwide.
Final Thoughts
In summary, 888 Holdings’ decision to sell its US online gambling assets to Hard Rock Digital reflects a strategic re-evaluation of its business priorities and a commitment to driving sustainable growth.
Upon completion, 888 Holdings will exit the US market, while Hard Rock Digital will assume control of its online gambling assets and continue to operate and expand its presence in the lucrative US online gambling market.
The transaction highlights the dynamic nature of the global online gambling industry and the importance of strategic partnerships and acquisitions in capturing market opportunities.
