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Everton, racing firm cut Sh4.2bn SportPesa ties

18th February, 08:04

English Premier League football club Everton and Formula One team Racing Point have severed a combined Sh4.2 billion sponsorship deal with SportPesa in the wake of the betting firm's closure.

Everton had two years to run on the SportPesa deal, which was inked in 2017, but after negotiations involving both parties, a decision has been made to cancel the £9.6 million-(Sh1.25 billion)-a-year agreement at the end of this season. The club has indicated that the end of the multi-billion shilling partnership was informed by commercial reasons and not the quest for football to distance itself from betting.

The deal with Racing Point, which was estimated to be worth Sh3 billion, has similarly been cut short, having been announced in early 2019 as a multi-year partnership.

The end of the sponsorships reflects the difficulties SportPesa has endured since the government denied it licences in July, leading to the closure of the sports betting platform that was estimated to be generating billions in annual sales.

SportPesa in October declared its 362 workers redundant after a prolonged tax standoff with the Kenya Revenue Authority (KRA), which set the stage for its Kenya exit and derailed its ambitions to cement its presence in four continents on the back of renowned global brands like Everton and Formula One.

The closure also dealt a further body blow to wealthy and influential investors behind SportPesa, who have since its formation in 2014 enjoyed juicy dividends with the exponential rise of mobile-based betting across Kenya.

An Everton spokesperson on Sunday evening said: "This has been a difficult decision, but one that allows us to best deliver on our commercial plan and to grasp the new opportunities now open to us".

Yesterday, SportPesa put on a brave face, suggesting that it will use its UK headquarters to pursue other opportunities. However, it did not mention the troubles it has been facing in Kenya.

"SportPesa has decided to change some of its global sponsorships in line with its new business strategy and sponsorships approach," the company said in a statement. "In light of this, SportPesa will not continue with some of these partnerships after the completion of the 2019/2020 season."

The Everton sponsorship contract was initially scheduled to run until May 2022.

In its statement, Everton said it was the one that terminated the deal to protect its commercial interests and that SportPesa has agreed to the same.

"The gaming brand, which has been Everton's main partner since 2017, has agreed to the termination of its contract. The agreement has been reached following a comprehensive review by the club of its commercial strategy in line with its vision and future growth plans," Everton said.

For SportPesa, the high-profile deals were part of its strategy to boost its global profile as it moved to expand into new markets in Europe and Africa after a successful launch in Kenya, which was its key market and money maker. The company still has operations in other countries, including South Africa, the UK and Tanzania.

SportPesa grew rapidly to dominate online betting with the government, KRA and the investigative website, Finance Uncovered, all estimating the firm's monthly revenues at between Sh6 billion and Sh8 billion -- translating to annual sales of about Sh100 billion. The company, however, put its annual revenue at Sh20 billion under what it calls Gross Gaming Revenue.

The billions encouraged SportPesa to ink the three-year deal with Racing Point F1 Team, which was reported to be worth Sh3 billion. The racing car rebranded to SportPesa Racing Point F1 Team.

Under the deal, SportPesa was expected to pay $8 million (Sh804 million) for its first year in 2019 followed by $10 million (Sh1 billion) in 2020 and a further $12 million (Sh1.2 billion) if they remained for the 2021 season.

"After an amazingly successful season with the Racing Point F1 Team, we wish them success in the 2020 competition," said SportPesa in a statement without giving further details.

Founded in Nairobi as a partnership of wealthy, politically-influential Kenyans and Bulgarian investors, SportPesa made its huge fortune from the online betting craze. Among its owners were CEO Ronald Karauri, businessman Paul Wanderi Ndung'u and Asenath Wachera Maina, the brains behind the 'Shinda Smart' lottery.

Three investors from Bulgaria -- Guerassim Nikolov of the ill-fated Toto 6/49 lottery, Valentina Nikolaeva Mineva and Ivan Kalpakchiev -- as well as American businessman Gene Grand were also in the list of top shareholders of Pevans East Africa, the business entity behind SportPesa.

Two other Kenyans, Francis Waweru Kiarie and Robert Kenneth Wanyoike Macharia, also had minority stakes in the firm, according to regulatory filings at the Registrar of Companies.

While announcing the closure of its Kenyan operations, SportPesa blamed taxes levied on the gaming and betting industry. KRA, for instance, had asked the firm to pay Sh21 billion in taxes. The tax demand on the entire industry stands at Sh61 billion.

SportPesa's runaway success attracted more competitors and the sector now has some 70 players, with most of them failing to remit withholding taxes, according to KRA.