William Hill owner 888 looks set to pull out of the consumer sports betting market in the US after putting the division up for review.
The group said it is carrying out a strategic review of its business-to-consumer US arm, which largely operates as SI Sportsbook and SI Casino, that could lead to the sale of the division, a “controlled exit” from the market or other possible “strategic” deals.
The firm said 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.
The move will see 888 pay 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.
But it will also deliver cost savings of around 6 million to 7 million US dollars (£4.7 million to £5.5 million) a year in 2024 and 2025.
It comes less than three years after 888 announced it was entering the US consumer market through a tie-up with Authentic Brands to capitalise on a sports betting boom in the country.
The group said it had come up against intense competition from established rivals and would need to pump in significant money to the business, citing the need to pay duties, market access fees and licence fees alongside other costs.
888 chief executive Per Widerstrom said: “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.”
The group first revealed the SI brand partnership in the US in June 2021.
It is currently active in four states, with SI Sportsbook and SI Casino in Michigan, SI Sportsbook in Colorado and Virginia, and 888casino in New Jersey.
But the group said its business-to-business operations in the US remain unaffected by the review.
Investors appeared to back the review of its US consumer betting business, with shares rising more than 3% in Wednesday morning trading.
James Wheatcroft, an analyst at Jefferies, said: “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.