888 Holdings Regulatory News (888)

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THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION

FOR IMMEDIATE RELEASE

7 April 2022

888 Holdings Plc

(the "Company" and, together with its subsidiaries, "888" or "the Group")

Acquisition of William Hill Update

Revised transaction terms; further clarity on funding plans; and on track for completion in June 2022

888 (LSE: 888), one of the world's leading online betting and gaming companies, provides an update on the terms relating to the acquisition of the international (non-US) business of William Hill ("William Hill" or "WH" or "WHI" and, together with the Group, the "Enlarged Group").

Key update highlights

· Enterprise value reduced from £2.2 billion to £1.95 - £2.05 billion (inclusive of £0.1 billion IFRS-16 capitalised leases).

· Represents an attractive acquisition multiple of approximately 7.5x normalised EBITDA, and 5.7x1 on a post-synergy basis for WHI for the 12 months ending December 20211.

· £250 million reduction in consideration payable on Completion.

· Up to £100 million deferred consideration payable in 2024, based on the Adjusted EBITDA of the Enlarged Group in 2023, to be settled in cash or 888 shares.

· Equity issuance of c.19% of issued share capital through an accelerated bookbuild, separately announced today, replacing original capital raise plans, such that the Company can target pro-forma net leverage of under 4x2.

· Combined Prospectus and Circular to be published in the coming weeks, with shareholder vote expected in May 2022 and Completion of Acquisition expected in June 2022.

· Pro-forma Enlarged Group 2021 revenue of £2.1 billion2 and Adjusted EBITDA of £437 million2.

· Acquisition expected to be immediately earnings enhancing to 888's adjusted net earnings per share.

Revised transaction terms

888 is pleased to announce that it has entered into an agreement (the "Amendment Deed") with Caesars Entertainment, Inc. (the "Seller") to amend certain terms of the Sale and Purchase Agreement dated 9 September 2021. The amendments to the Sale and Purchase Agreement reflect the change in the macro-economic and regulatory environment since the announcement of the Acquisition, as well as compliance factors impacting the WH business, including actions taken as part of an ongoing review by the Gambling Commission of Great Britain ("UKGC").

The key elements of the Amendment Deed are:

· Cash consideration (equity value) payable to the Seller at closing reduced from £834.9 million to £584.9 million.

· Agreement to pay up to £100 million in deferred consideration in 2024, conditional upon the Enlarged Group achieving a minimum level of Adjusted EBITDA for the 12-month period ending 31 December 2023 (the "Deferred Consideration"), additional details are set out in the Appendix below.

· If payable, 888 may elect to satisfy all or any proportion of the Deferred Consideration in cash or by the issuance by 888 of new Ordinary Shares to the Seller.

· In connection with the ongoing licence review by the UKGC at WH, the Seller has agreed to indemnify the UK licenced entities from Completion with respect to certain potential losses and costs arising from the licence review. Further details on the licence review and the related indemnity provided by the Seller are set out in the Appendix below.

Strong strategic and financial rationale unchanged

The Board of Directors of 888 (the "Board") continues to believe that the Acquisition represents a transformational opportunity for 888 to significantly increase its scale, further diversify and strengthen its product mix and build leading positions across several of its key markets.

The Board continues to believe the Acquisition has highly compelling strategic and financial benefits, with the current macro-economic environment and changing market conditions across its key markets only serving to strengthen the rationale for bringing together two highly complementary businesses and combining two of the industry's leading brands. Alongside the strategic benefits, the combination of 888 and WHI is expected to deliver significant operating efficiencies, including pre-tax cost synergies of at least £100 million3, including £15m in capex synergies, on or before 2025, with integration plans well progressed to ensure a well-executed integration and timely realisation of anticipated synergies. The Company currently expects to cumulatively achieve approximately £5m of such synergies in 2022, £54m in 2023, £70m in 2024, and £100m in 2025. In achieving these synergies, the Company expects to incur one-time cash costs of approximately 1x annual pre-tax cost synergies, spread across the first three years following completion of the Acquisition.

The Enlarged Group will be strongly growth-oriented, benefitting from a clear scale advantage and strong product and geographic diversification. With a focus on regulated markets, it will be able to offer customers world-class products, supported by leading betting and gaming brands, driving sustained growth and shareholder value creation over the medium and long term.

The Enlarged Group will continue its focus on developing and improving safer gambling processes and raising industry standards, leveraging knowledge from 888 and WHI to ensure protecting customers remains the top priority.

Updated financing of the Acquisition and capital structure

· In order to fund the Acquisition, 888 has fully committed debt financing from J.P. Morgan, Morgan Stanley, Mediobanca and Barclays Bank PLC of approximately £2.1 billion, which may take the form of senior secured term loans, other senior secured debt and/or other junior debt, as well as a fully committed revolving credit facility of £150 million (all together, the "Commitments"). 

· 888 intends to issue up to 70.8 million new ordinary shares4 in the capital of the Company through an accelerated bookbuild, representing approximately 19 per cent. of the issued share capital of the Company (the "Placing"), with further details set out in the separate announcement issued by the Company today. This Placing replaces the previously announced expectation to raise approximately £500 million of gross proceeds at the appropriate time by issuing new equity via a capital raise.

· The Placing has been chosen as it minimises the time required to raise the intended proceeds, noting current market conditions. The Company has consulted with its major institutional shareholders ahead of release of this Announcement and the separate announcement on the Placing, which has confirmed the Board's view that the Placing is in the best interests of shareholders, as well as wider stakeholders in the Company and will promote the success of the Company.

· The reduction in quantum of equity proceeds is likely to result in 888's net debt / EBITDA temporarily running at levels slightly above those previously anticipated. However, the Board believe this is in the best long-term interests of shareholders, with strong free cash flow generation expected to support a more rapid deleveraging than originally expected, with 888's net debt / EBITDA still expected to be at or below 3x in the medium term.

· In order to accelerate deleveraging, and following feedback from shareholders, the Board intends to suspend the payment of dividends until such time as the Enlarged Group's net leverage ratio is at or below 3x, or such earlier time as the Board considers appropriate.

Trading update

888 - Revenue for the first quarter of 2022 is currently expected to be in the range of $222-226 million, an increase of 0-2% compared to Q4 2021. The positive performance relative to Q4 2021 reflects 888's continued focus on product and content leadership, customer excellence, and the ongoing success of its world-class brands and marketing. The mid-teens percentage decrease in revenue for Q1 2022 relative to Q1 2021 on a year-on-year basis primarily reflects of the previously announced regulatory and compliance impacts, including the temporary closure of The Netherlands, and the very strong comparative period that was impacted by leisure restrictions across several of our key markets. 888 currently expects to provide a more detailed Q1 2022 trading update later this month.

WH - In the 52-weeks ending 28 December 2021, WH revenue was £1,241.4 million and adjusted EBITDA was £164.4 million. The retail estate was closed for a significant portion of H1 2021, and 888 believes that taking the H2 2021 run-rate for retail revenue and EBITDA suggests normalised retail revenue of £499 million and adjusted EBITDA of £96.2 million for retail in H1 2021 and total group normalised revenue of £1,403.6 million and adjusted EBITDA of £260.0 million. FY 2022 revenues for WH are currently expected to grow by a low to mid-single digit percentage on a reported basis, with the normalisation of retail and underlying progress in online being partially offset by regulatory and compliance headwinds.

Path to completion

· 888 now expects to publish a combined circular and prospectus for the Acquisition and Re-admission, including the notice of General Meeting (the "Combined Circular and Prospectus") in the coming weeks.

· The General Meeting for shareholder approval of the Acquisition is expected to be held in May 2022.

· 888 expects to announce credit ratings and syndicate institutional debt in the coming weeks.

· Completion of the Acquisition is expected to occur in June 2022.

Shareholder support and Board's recommendation

· 888 has received unconditional support for the Acquisition from its largest shareholder, the Dalia Shaked Trust ("the Trust"), which holds approximately 23% of the issued share capital of 888 as at the date of this announcement. The trustee of the Trust has entered into an irrevocable undertaking with 888 and the Seller, under which it has agreed to vote all of the 888 shares held by it in favour of the resolution to approve the Acquisition (the "Resolution") at the General Meeting. Further details regarding the irrevocable undertaking are set out in the Appendix to this announcement. 

· The Board has approved the Acquisition under its revised terms and intends to unanimously recommend that 888 shareholders vote in favour of the Resolution at the General Meeting. The directors of 888 who own shares have confirmed their intention to vote in favour of the Resolution in respect of their own beneficial holdings, which amount to approximately 0.35% of 888's total issued ordinary share capital as at the date of this announcement.

A copy of this announcement will shortly be available at https://corporate.888.com and https://wh-acquisition.888.com 

The content of the websites referred to in this announcement are not incorporated into and do not form part of this announcement.

Save where expressly provided, the defined terms used in this announcement have the same meaning as set out in the Company's announcement on the Acquisition dated 9 September 2021.

Notes

1 Normalised EBITDA for WHI on a post IFRS16 basis and including an adjustment to include a full year of retail contribution based on last 6 months of 2021. 5.7x multiple includes £85m non-capex cost synergies2 Based on unaudited management accounts of WHI and remains subject to change. The final version of the WHI historical financial information will be included in the prospectus to be published in due course. Adjusted EBITDA figure includes £54mm of non capex cost synergies expected in YE 2023, net of £3.5m related to FX differences, and both Revenue and Adjusted EBITDA figures include the retail adjustment which includes a full year of retail contribution based on the performance of the last 6 months of 2021, actual figures for retail in 2021 were Revenue £336.8m and EBITDA £0.6m3 Synergies have been calculated in $ and translated back to £ for the purposes of this announcement at an exchange rate of £1:$1.37574 The ordinary shares of GBP 0.005 each in the capital of the Company5 Adjustment to include a full year of retail contribution based on the performance during weeks 27-40 of 2020 during which retail was open and sport was taking place, actual figures were Revenue £354.2m and EBITDA £14.6m6 Adjustment to include a full year of retail contribution based on the performance of the last 6 months of 2021, actual figures were Revenue £336.8m and EBITDA £0.6m.

Enquiries and further information:

About 888 Holdings Plc:

888 Holdings plc (and together with its subsidiaries, "888" or the "Group") is one of the world's leading online betting and gaming companies. 888's mission is to lead the gambling world in creating the best betting and gaming experiences, bringing unrivalled moments of excitement to people's day-to-day lives by developing state-of-the-art technology and products that provide fun, fair and safe online betting and gaming entertainment to customers around the world.

888 has been at the forefront of the online gaming industry since its foundation in 1997, leveraging its proprietary technology to create an innovative and world-class online betting and gaming experience. The Group is structured into two lines of business: B2C, under the 888 brands, and B2B, conducted through Dragonfish, which provides partners a leading platform through which to establish an online gaming presence and monetise their own brands in a safe and responsible manner.

In recent years, 888's continued focus on innovation has been recognised through industry awards. In 2021, the Group was named Casino Operator of the Year and its in-house sportsbook was recognised as the In-House Product of the Year at eGaming Review's (EGR) prestigious Operator of the Year Awards. In the same year, the Group also won the Poker Marketing Campaign at EGR's Marketing & Innovation Awards for its Made to Play campaign.

888's consumer facing websites offer more than just online betting and gaming. They are entertainment destinations: places where people can enjoy a truly interactive experience and be part of an online community that shares common interests. 888's strong and trusted brands are all accessible through www.888.com.

Find out more about 888 at http://corporate.888.com/.

Important Notices

This announcement is an announcement and not a circular or prospectus or equivalent document and prospective investors should not make any investment decision on the basis of its contents. The Combined Circular and Prospectus in relation to the transaction will be published in due course. Nothing in this announcement constitutes an offer of securities for sale in any jurisdiction.

This announcement is for informational purposes only and is not an offer of securities for sale in any jurisdiction where to do so would be unlawful. Securities may not be offered or sold in the United States absent registration under the US Securities Act of 1933, as amended (the "US Securities Act"), or an exemption therefrom. The securities referred to herein have not been and will not be registered under the US Securities Act or under the securities laws of any state or other jurisdiction of the United States, and may not be offered or sold, taken up, resold, transferred or delivered in the United States except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the US Securities Act and in accordance with any applicable securities laws of any state or other jurisdiction of the United States.

J.P. Morgan Securities plc, which conducts its UK investment banking business as J.P. Morgan Cazenove ("J.P. Morgan Cazenove"), and which is authorised in the United Kingdom by the Prudential Regulation Authority (the "PRA") and regulated by the PRA and the Financial Conduct Authority, is acting as financial adviser for the Company in connection with the Acquisition and will not regard any other person as its client in relation to the Acquisition and will not be responsible to anyone other than the Company for providing the protections afforded to clients of J.P. Morgan Cazenove or its affiliates, nor for providing advice in relation to the Acquisition or any other matter or arrangement referred to herein.

Stifel, Nicolaus & Company, Incorporated ("Stifel") is acting as financial adviser for the Company in connection with the acquisition. Stifel is acting exclusively for the Company and no one else in connection with the contents of this announcement, and will not be responsible to anyone other than the Company for providing the protections afforded to clients of Stifel nor for providing advice in relation to or in connection with the matters referred to in this announcement.

No person has been authorised to give any information or to make any representations other than those contained in this announcement and, when published, the Combined Circular and Prospectus and, if given or made, such information or representations must not be relied on as having been authorised by the Company. Subject to the Listing Rules, the Prospectus Regulation Rules and the Disclosure Guidance and Transparency Rules of the FCA, the issue of this announcement shall not, in any circumstances, create any implication that there has been no change in the affairs of the Company since the date of this announcement or that the information in it is correct as at any subsequent date.

This announcement may contain certain forward-looking statements, beliefs or opinions, with respect to the financial condition, results of operations and business of the Company, the Enlarged Group following the Acquisition and the Acquired Businesses. These statements, which contain the words "anticipate", "believe", "intend", "estimate", "expect", "may", "will", "seek", "continue", "aim", "target", "projected", "plan", "goal", "achieve" and words of similar meaning, reflect the Company's beliefs and expectations and are based on numerous assumptions regarding the Company's present and future business strategies and the environment the Company and the Enlarged Group will operate in and are subject to risks and uncertainties that may cause actual results to differ materially. No representation is made that any of these statements or forecasts will come to pass or that any forecast results will be achieved. Forward-looking statements involve inherent known and unknown risks, uncertainties and contingencies because they relate to events and depend on circumstances that may or may not occur in the future and may cause the actual results, performance or achievements of the Company or the enlarged Group to be materially different from those expressed or implied by such forward looking statements. Many of these risks and uncertainties relate to factors that are beyond the Company's or the Enlarged Group's ability to control or estimate precisely, such as future market conditions, currency fluctuations, the behaviour of other market participants, the actions of regulators and other factors such as the Company's or the Enlarged Group's ability to continue to obtain financing to meet its liquidity needs, changes in the political, social and regulatory framework in which the Company or WHI operate or in economic or technological trends or conditions. Past performance of the Company or WH cannot be relied on as a guide to future performance. As a result, you are cautioned not to place undue reliance on such forward-looking statements. The list above is not exhaustive and there are other factors that may cause the Company's or the Enlarged Group's actual results to differ materially from the forward-looking statements contained in this announcement Forward-looking statements speak only as of their date and the Company, its respective parent and subsidiary undertakings, the subsidiary undertakings of such parent undertakings, and any of such person's respective directors, officers, employees, agents, affiliates or advisers expressly disclaim any obligation to supplement, amend, update or revise any of the forward-looking statements made herein, except where it would be required to do so under applicable law. You are advised to read this announcement and, once published, the Combined Circular and Prospectus in their entirety for a further discussion of the factors that could affect the Company's future performance. In light of these risks, uncertainties and assumptions, the events described in the forward-looking statements in this announcement may not occur. No statement in this announcement is intended as a profit forecast or a profit estimate and no statement in this announcement should be interpreted to mean that the financial performance of the Company for the current or future financial years would necessarily match or exceed the historical published for the Company.

Appendix 1

Regulatory and compliance developments in relation to WH

WH ongoing licence review by the UKGC

Following a compliance assessment conducted in July and August 2021, the William Hill Group is subject to an ongoing licence review and is addressing certain action points raised by the UKGC in relation to WH's social responsibility and anti-money laundering obligations. It has provided the UKGC with an action plan to address the action points raised by them and is in the process of implementing that action plan. WH intends to provide in its financial statements for WH FY 2021 to cover expected potential cash outflows resulting from any regulatory sanctions and associated costs resulting from this compliance assessment and licence review, noting that the UKGC has a wide range of enforcement powers at its disposal, including the power to request remedial actions, impose fines and suspend licences. Certain licenced entities within the WH Group also have the benefit of an indemnity provided by Caesars as described further below to apply to certain losses and costs that may arise in the event any of the relevant operating licences are suspended or are subject to conditions imposed by the UKGC in connection with the licence review.

Indemnity agreement with Caesars

On 8 March 2022, Mr Green Limited, WHG (International) Limited and William Hill Organization Limited (together, the "Licensed Entities") and Caesars entered into a deed of indemnity (the "Indemnity Deed"). Pursuant to the Indemnity Deed, with effect from Completion, Caesars shall indemnify each of the Licensed Entities from and against certain liabilities arising from any licence suspension or specific licence conditions imposed by the UKGC during the course of the licence review currently being carried out by the UKGC.

The total aggregate liability of Caesars in respect of all claims under the Indemnity Deed:

1. Any licence suspension imposed by the UKGC in respect of the Licensed Entities shall not exceed £152 million in aggregate.

2. Any licence conditions imposed by the UKGC in respect of the Licensed Entities shall not exceed £78 million in aggregate.

3. Following the lifting of any licence suspension, Caesars shall make an additional one-time reactivation payment not exceeding £150 million in aggregate to the Licensed Entities.

The Licensed Entity must notify Caesars as soon as practicable after they become aware of liability under the Indemnity Deed and in any event no later than three months after the date on which the UKGC issues its final decision notice in relation to the current licence. Caesars also has certain information, consultation and conduct rights as indemnifying party, including the right to appoint an independent expert.

Deferred consideration

Pursuant to the terms of the Sale and Purchase Agreement, as amended by the Amendment Deed, 888 shall pay up to GBP 100 million in Deferred Consideration based on the EBITDA of the Enlarged Group for the 12-month period ending 31 December 2023 (the "2023 EBITDA").

For the maximum amount of GBP 100 million in Deferred Consideration to become payable, the 2023 EBITDA must be more than or equal to GBP 428 million.

If the Seller and 888 Bidco cannot agree upon the 2023 EBITDA figure, the matter shall be referred to an independent expert for determination in accordance with the terms of the Sale and Purchase Agreement.

If payable, 888 may elect to satisfy all or any proportion of the Deferred Consideration either in cash or by the issuance by 888 of new Ordinary Shares to Caesars. The number of new Ordinary Shares to be issued for the purposes of settling any amount of Deferred Consideration shall be calculated by dividing the relevant amount of Deferred Consideration by the average volume weighted price of an Ordinary Share on each of the trading days over the three-month period ending on and including the fifth trading day prior to the date on which such Deferred Consideration is to be paid.

Between Completion and 31 December 2023, 888 Bidco and 888 agree that they shall not take, and shall procure that no member of the Enlarged Group takes, any action intended to frustrate the payment of, or reduce the amount of, Deferred Consideration. The full GBP 100 million consideration shall be immediately due and payable in full in cash if, at any time prior to 31 December 2023, 888 experiences a change of control.

Irrevocable Undertaking

The trustee of the Dalia Shaked Trust, the Company and the Seller entered into an English law governed irrevocable undertaking dated 1 April 2022, affirming support of the revised transaction terms, pursuant to which the trustee of the Trust has irrevocably agreed: (i) to vote (or procure a vote of) the shares in the capital of the Company ("888 Shares") that it holds (representing approximately 23 per cent. of the issued ordinary share capital of the Company), and any subsequent 888 Shares acquired by it, in favour of the Resolution at the General Meeting; and (ii) not to sell, transfer, charge, encumber, grant any option over or otherwise dispose of any 888 Shares prior to Completion. The irrevocable undertaking lapses on the earlier of the termination of the Sale and Purchase Agreement and the date on which Completion occurs.

APPENDIX 2

KEY INFORMATION

Capitalised terms used in this Appendix have the meaning given in the "Definitions" and "Glossary" sections set out at the end of the Appendix, unless the context requires otherwise. The information has not been subject to any independent review or audit, and no representation or warranty, express or implied, is made or given by the Company. Such information presented in this Appendix is subject to verification, correction, completion and change without notice. Past performance of the Company or the Target Business, such as the information presented in this Appendix, is not indicative of future performance. The future performance of the Company, its subsidiaries and the Target Business will depend on numerous factors which are subject to uncertainty. The Company, its shareholders, advisors and employees and those of their affiliates are not liable for the accuracy and completeness of the information provided in this Appendix. The final version of this information will be included in the Combined Prospectus and Circular that is expected to be published in the coming weeks.

RISK FACTORS

This section describes risk factors considered by the Company to be material in relation to the 888 Group, the Target Business and, following Completion, the Enlarged Group. The occurrence of any of these risks may have a material adverse effect on the business, results of operations, financial condition and prospects of the 888 Group, the Target Business and, following Completion, the Enlarged Group, or the market price of the 888 Shares.

The following is not an exhaustive list or explanation of all risks which Shareholders may face and should be used as guidance only. Additional risks and uncertainties relating to the 888 Group, the Target Business and, following Completion, the Enlarged Group or the Proposed Acquisition that are not currently known to the Company, or that it currently deems immaterial, may individually or cumulatively also have a material adverse effect on the business, results of operations, financial condition and prospects of the 888 Group, the Target Business and, following Completion, the Enlarged Group, and, if any such risk should occur, the price of the 888 Shares may decline.

RISKS RELATING TO LAW AND REGULATION OF THE BETTING AND GAMING INDUSTRY

The regulation and legality of betting and gaming varies from jurisdiction to jurisdiction and is subject to uncertainties, changes and requirements in many jurisdictions, and approaches to enforcement vary from jurisdiction to jurisdiction.

The regulatory framework of betting and gaming, whether online or in person, is dynamic, evolving and complex. The regulation and legality of betting and gaming varies from jurisdiction to jurisdiction (from open licensing regimes to sanctions or prohibitions) and in certain jurisdictions, there is no directly applicable legislation. In some jurisdictions, betting and gaming, or the offering or marketing of betting and gaming, may be illegal and could incur criminal liabilities. In many jurisdictions, there are conflicting laws and/or regulations, conflicting interpretations, divergent approaches by enforcement agencies and/or inconsistent enforcement policies. Many of these laws, regulations and licensing requirements are recent and are subject to change at any time and relevant regulatory authorities may change their interpretation thereof at any time. There is often an absence of binding judicial guidance or clear guidelines on these matters and licensing decisions are subject to broad regulatory discretion.

The regulatory licensing regimes for betting and gaming can be simplistically divided into two categories: (i) "point of consumption" or ".country" licences; and (ii) "point of supply" or ".com" licences. The former, ".country" licences, are betting and gaming licences issued by a specific jurisdiction that allow the licencee to provide its services into that same jurisdiction. The latter, ".com" licences, are not territory specific, but rather enable the supply of online betting and gaming services to end users in jurisdictions other than the jurisdiction that issued the relevant licence. Such services are to be carried out in accordance with online betting and gaming regulations in the jurisdiction that issued the relevant ".com" licence and under the governance of the relevant regulator and regulatory regime thereof. This is based on the principle of internet legislation that deems the provision of an online product as being provided where the operator is established and located. Both the 888 Group and the Target Business provide services to certain jurisdictions, including in the Middle East, Africa and South America, based on .com licences.

Newly enacted or modified licensing regimes in jurisdictions where there is existing regulation may impose operational conditions on the 888 Group, the Target Business and, following Completion, the Enlarged Group that are onerous or commercially unviable, and changes to either the regulatory framework or enforcement policy relating to gaming in certain markets may effectively force the 888 Group, the Target Business and, following Completion, the Enlarged Group to withdraw or suspend the provision of services in certain markets where they currently operate or compel them to change their business practices or technology in a way that would materially impact results. Furthermore, legal and other action may be taken by incumbent gaming providers in jurisdictions, which are seeking to regulate online gaming, in an attempt to frustrate the grant of online gaming licences to the 888 Group, the Target Business and, following Completion, the Enlarged Group.

For example and as described in the risk factor in this section titled "The UK government's ongoing review of the Gambling Act may result in more onerous regulation of the betting and gaming industry in the UK, the single largest market for both the 888 Group and the Target Business, which could have a material adverse effect on the business, results of operations, financial condition and prospects of the Enlarged Group" below, the regulation of betting and gaming in the UK is currently undergoing further review by the UK government and there has been a tightening of regulation by the UKGC.

In part as a response to the COVID-19 pandemic, various jurisdictions have or are in the process of adopting a more stringent approach to customer protection, primarily to avoid the emergence of problem gambling patterns amongst those sheltering at home, and to curtail excessive spending on gambling during a period of economic downturn. This has taken the form of advertising restrictions, and the imposition of stricter customer protection and responsible gambling measures, either temporarily or on a permanent basis.

In addition, the legal framework is also consistently evolving in jurisdictions where betting and gaming is not yet fully regulated, as described in the risk factor in this section titled "The clarification of the regulation of online betting and gaming and the opening of new markets may restrict the ability of the Enlarged Group to continue to derive revenue from the existing markets of the 888 Group and the Target Business and may lead to increased competition".

Such regulatory changes in markets with established rules and regulations and those that are experiencing ongoing development in their legal framework could impede the ability of the 888 Group, the Target Business and, following Completion, the Enlarged Group to generate revenue in key markets, attract new and existing customers or expand into new markets, which could have a material adverse effect on the business, results of operations, financial condition and prospects of the 888 Group, the Target Business and, following Completion, the Enlarged Group.

The UK government's ongoing review of the Gambling Act may result in more onerous regulation of the betting and gaming industry in the UK, the single largest market for both the 888 Group and the Target Business, which could have a material adverse effect on the business, results of operations, financial condition and prospects of the Enlarged Group.

In December 2020, the UK government commenced a review of the Gambling Act, with the objective of: (i) examining whether changes are needed to the system of gambling regulation in the UK to reflect changes to the gambling landscape since 2005 when the Gambling Act was introduced, particularly due to technological advances; (ii) ensuring there is an appropriate balance between consumer freedoms and choice on the one hand, and prevention of harm to vulnerable groups and wider communities on the other; and (iii) ensuring customers are suitably protected whenever and wherever they are gambling, and that there is an equitable approach to the regulation of the online and the land based industries.

The UK government's review of the Gambling Act is extensive in scope. Key areas under review include:

· the effectiveness of the existing online protections in preventing gambling harm and an evidence-based consideration of, by way of example, imposing greater control on online product design such as stake, speed and prize limits and the introduction of deposit, loss and spend limits;

· the benefits or harms caused by allowing licensed gambling operators to advertise and make promotional offers and the positive or negative impact of gambling sponsorship arrangements across sports, esports and other areas;

· the effectiveness of the regulatory system currently in place, including consideration of whether the UKGC has sufficient investigative, enforcement and sanctioning powers both to regulate the licensed market and address the unlicensed market;

· the availability and suitability of redress arrangements in place for an individual consumer who considers it may have been treated unfairly by a gambling operator, including consideration of the introduction of other routes for consumer redress, such as a gambling ombudsman; and

· the effectiveness of current measures to prevent illegal underage gambling and consideration of what extra protections may be needed for young adults in the 18-25 age bracket.

The UK government launched a 16-week call for evidence alongside the commencement of its review into the Gambling Act. The call for evidence closed on 31 March 2021. The UK government's findings will be informed by the data and evidence from the call for evidence. It is anticipated that the UK government will issue its conclusions and any proposals to amend the Gambling Act could follow in the second quarter of 2022. The extent and scope of such conclusions and proposals and their impact on the Enlarged Group is currently unknown.

This review is in addition to recent reforms introduced by the UKGC. For example, in 2020, the UKGC introduced a ban on the use of credit cards to place bets and issued industry guidance regarding high-value customer schemes (often referred to as VIP programmes) which include, among other things, a requirement for licenced operators to undertake checks to establish that a high value customer's spending is affordable and sustainable, whether there is any evidence of gambling related harm or heightened risk linked to vulnerability, and that the operator has in place up to date evidence relating to the individual's identity, occupation and source of funds. Further, in February 2021, the UKGC also announced a number of measures that has impacted the design and offer of online slots games, which generated approximately GBP 2.3 billion revenues in the UK in 2021, accounting for 39 per cent. of the total UK online and betting market, including the banning of the following features with effect from 31 October 2021: (i) features that speed-up play; (ii) slot spin speeds faster than 2.5 seconds; (iii) auto-play, which can lead to players losing track of their play; and (iv) sounds or imagery which give the illusion of a win when the return is in fact equal to, or below, a stake. In addition, in response to a ban in the UK on television advertising during sporting events that air before 9 p.m., the 888 Group and the Target Business have voluntarily stopped, and following Completion, the Enlarged Group will continue to voluntarily stop, broadcasting television adverts within five minutes of the start of a sporting event until after the event ends. As a result of the UKGC reforms, the 888 Group also has increased its focus on better assessing affordability of its customers on an ongoing basis, and developing mechanisms that will allow them to be more in control of their customer experience. For example, the 888 Group has lowered the maximum wager amount per spin that a customer can bet via its video slot portfolio of games and has developed a new dynamic product that enables customers to play more responsibly through better accessibility of tools providing them their own live user data, an easy link to define a deposit limit, which helps facilitate enhanced control over their gameplay. Since the introduction of the UKGC reforms and the associated modifications and controls the 888 Group has introduced to its product offerings, management has observed an increase in the number of customers adding deposit limits to their accounts, with 41 per cent. of active customers utilising deposit limits during the fourth quarter of 2021.

In October 2021, the UK Department of Health issued a report dealing with the costs of gambling related harm, in response to which Public Health England has urged the UK government to treat gambling harm as a public health issue. In November 2021, the UKGC also opened a consultation on changes and updates to its Licensing, Compliance and Enforcement Policy, aimed at bringing certain gambling products which the UKGC consider to contain financial elements under the regulation of the FCA. The consultation closed in February 2022, but the results of the consultation are yet to be published. Further, on 5 April 2022, the UK Committee for Advertising Practice ("CAP") announced the introduction of new rules intended to prevent adverts for gambling products and services from featuring people likely to have a strong appeal for children and young people, such as celebrities or sports persons.

The UK is the single largest market for both the 888 Group and the Target Business. In FY 2021, the 888 Group generated 39.7 per cent. and in Target FY 2021 the Target Business generated 77.8 per cent., of their respective overall revenues in the UK. Therefore, changes to regulation arising from the UK government's review of the Gambling Act, or recent or further measures introduced by the UKGC or other bodies such as CAP, could impede the ability of the 888 Group, the Target Business and, following Completion, the Enlarged Group to generate revenue in the UK and attract new and existing customers in the UK, which could have a material adverse effect on the business, results of operations, financial condition and prospects of the 888 Group, the Target Business and, following Completion, the Enlarged Group.

The Enlarged Group could face the risk of loss, revocation, non-renewal or change in the terms of its gaming licences.

The 888 Group's and the Target Business' gaming licences tend to be issued for fixed periods of time after which a renewal of the licence is required. Similar terms are likely to apply to gaming licences that will be issued to the Enlarged Group. Licences and associated legislation also typically include a right of termination or suspension for the regulator in certain circumstances and regulators across a number of jurisdictions periodically review and audit the compliance of operators with local gaming regulations. Any revocation, suspension or non-renewal of these gaming licences may have a material adverse effect on the business, results of operations, financial condition and prospects of the 888 Group, the Target Business and, following Completion, the Enlarged Group.

The 888 Group is currently licensed in Gibraltar, the UK, Germany, Spain, Italy, Malta, Denmark, Ireland, Portugal, Romania, Sweden, the province of Ontario in Canada and the US. The revocation, suspension or non-renewal of these licences may arise as a result of the failure by the directors, management, shareholders or other investors thereof to adequately comply with the suitability, information reporting or other requirements (operational or otherwise) of the licensing and regulatory authorities. In addition, the revocation, suspension or non-renewal of these gaming licences or any other licence which may become material to the Enlarged Group may lead to adverse publicity and could have an impact upon its ability to successfully maintain its existing licences, apply for future licences in jurisdictions where it already has a licence or jurisdictions in which the Enlarged Group may seek licences in the future.

Certain activities of the 888 Group, the Target Business and, following Completion, the Enlarged Group, could be construed as infringing national law prohibitions, whether administrative or criminal in nature, by domestic regulatory and/or prosecutorial authorities where the 888 Group, the Target Business and, following Completion, the Enlarged Group have operations, hold licences or provide services to customers. In the event that this results in successful prosecutions, these activities could be characterised by prosecuting authorities as licence infringement, which could lead to the termination or revocation of some or all of the licences issued by such authority in the relevant jurisdiction. Furthermore, a successful prosecution of any entity within the Enlarged Group could be grounds for suspension or revocation of licences held by other entities within the Enlarged Group or of licences held in other jurisdictions.

The Proposed Acquisition and the resulting change of control of the Target Business will require notifications to, or regulatory approvals from, the relevant regulatory authorities either prior to or following Completion. These requirements result from the regulations or licensing conditions applicable to the licences held by the 888 Group or the Target Business. The vast majority of the relevant regulatory authorities solely require a notification. The Company believes that the small number of necessary approvals should be forthcoming; however it cannot be ruled out that 888 or Caesars may not obtain certain necessary approvals, or that they may not be obtained within a timescale acceptable to 888 or Caesars, or that they may only be obtained subject to certain conditions or undertakings which may not be acceptable to 888 or Caesars. If the necessary regulatory approvals are not obtained in a certain jurisdiction, the Enlarged Group will not be able to continue to legally operate in that jurisdiction.

Furthermore, it is possible that the 888 Group's or the Target Business' separate conduct in any of the licensed jurisdictions could, following Completion, have an adverse impact on the good standing of the Enlarged Group with the regulatory authorities in any such jurisdiction, thereby risking the entire Enlarged Group's licensing status in such jurisdictions. If the approvals are delayed or if the renewal of the licences are on terms that are less favourable to the Enlarged Group than the existing terms of the licences of the 888 Group and the Target Business, this could have a material adverse effect on the Enlarged Group's business, results of operations, financial condition and prospects.

The clarification of the regulation of online betting and gaming and the opening of new markets may restrict the ability of the Enlarged Group to continue to derive revenue from the existing markets of the 888 Group and the Target Business and may lead to increased competition.

Certain jurisdictions may implement changes to their markets through the adoption of competitive licensing and regulatory frameworks, as recently announced in markets such as Germany, the Netherlands and Canada. Whilst these changes may provide growth opportunities for the Enlarged Group in new and existing markets, a new licensing and regulatory regime adopted in any such jurisdiction may impose onerous conditions, such as particular licensing requirements, together with enforcement sanctions for breach thereof, and taxation liabilities that may make the market unattractive to the Enlarged Group. Restrictions may also be imposed by these jurisdictions such that the Enlarged Group may be limited in its ability to offer certain of its key products or to market its products in the way it would wish to do so. These restrictions may limit the profitability of the future operations of the Enlarged Group in the existing markets of the 888 Group, or in new markets that are opening up, and may result in the Enlarged Group being subject to additional anti-money laundering requirements. For example, the Enlarged Group may be limited to operating only as a B2B service provider (through other licensed entities) rather than as a B2C operator, resulting in a negative impact on profitability and limiting its market options. The 888 Group and the Target Business have each historically taken different approaches in certain jurisdictions and the past activities of either the 888 Group or the Target Business in any such jurisdiction could impact the Enlarged Group's ability to become licensed or approved to operate there in due course, should such jurisdiction seek to adopt a local licensing framework.

Germany

Germany has recently introduced federal sports betting licences, adopted a temporary toleration regime for online casino products (such as virtual slots and poker) and, during 2021, introduced an online slots and poker licensing regime in the state of Saxony-Anhalt. Compliance with the conditions of these new regimes and the licence applications required various modifications and alignments of the 888 Group's and the Target Business' German offering, which has impacted the profitability of the 888 Group's and Target Business' operations and, following Completion, will continue to impact the profitability of the operations of the Enlarged Group, in Germany. Both the 888 Group and the Target Business are also subject to certain prohibition orders issued against it in various German states, which they are challenging in court.

The Netherlands

Regulatory developments have also occurred in the Netherlands where, on 1 April 2021, the new Online Gambling Act entered into force, launching an online gambling licensing regime on 1 October 2021. Operators who wish to apply for an online licence in the Netherlands must ensure they are in compliance with the "prioritisation criteria", which is a list of conditions that, if adhered to by an operator, effectively mean that such operator will not be the subject to enforcement action by the regulator prior to the entry into force of the new regulatory regime. Operators are also subject to a "cooling off" period of 33 months prior to their eligibility to submit a licence application, during which time they must not have breached the prioritisation criteria. During September 2021, the Dutch Gambling Authority published new enforcement rules in relation to the prioritisation criteria, that entered into force commencing 1 November 2021. Any operator not adhering to the requirements may be subjected to monetary fines. Compliance with the conditions of the "prioritisation criteria" and required various modifications and alignments of the 888 Group's and the Target Business' offering, has impacted the profitability of the 888 Group's operations and, following Completion, may continue to impact the profitability of the operations of the Enlarged Group, in the Netherlands.

In light of the foregoing policy changes published by the Dutch Gambling Authority during September 2021, the 888 Group announced its decision to cease provision of services in the Netherlands from 1 October 2021 until such time as it is awarded a local licence. The 888 Group is in the process of applying for such a local licence in the Netherlands and, although the timing of any licence award remains unclear, the 888 Group aims to be operational within the country during the second half of 2022.

Canada

The Canadian province of Ontario introduced an online licensing process available to offshore operators, and the 888 Group has recently acquired such a license. It is still uncertain if and how such licensing and local operations will affect the offering in the rest of Canada, however any potential implication may significantly impact the profitability of the 888 Group's operations and, following Completion, may continue to impact the profitability of the operations of the Enlarged Group, in Canada.

Brazil

Brazil adopted a federal framework legislation late in 2018, which would bring commercial online gambling to this significant jurisdiction. However, it has not yet adopted the necessary regulatory instruments to implement the regime. The authorities conducted a consultation process with industry stakeholders in 2021, and are in the process of drafting legal instruments for implementing the new regime. Once enacted, the new regime will allow for the licensing of commercial sports betting operators. There are, however, still many open questions as to how the regime will operate in practice. In late 2021, Brazilian government officials expressed that the new sports betting market in Brazil will be launched before the 2022 FIFA World Cup. Regulatory reform is also taking place on the state level in Brazil (which may potentially lead to parallel licensing requirements for operators). While federal regulations are expected to be finalised in the first half of 2022, regulatory reforms on the state level are continuing to quickly evolve. This is due to a decision rendered by the Brazilian Federal Supreme Court in December 2020, which set out that states may regulate lottery activities and decide whether these will be run by the state, via a concession or via local licenses awarded to private operators. Lotteries at the federal level encompass sports betting, and it is widely thought that this will also be the case on the state level. It is currently uncertain if and how such regulatory reform will affect the offering of online betting and gaming services in Brazil, which may, in turn, significantly impact the profitability of the 888 Group's operations and, following Completion, may continue to impact the profitability of the operations of the Enlarged Group, in Brazil.

The Enlarged Group may face difficulty in competing in new and existing markets with providers that take a less conservative approach to regulation than it will. Such providers are able to generate revenues in markets in which the 888 Group does not, and the Enlarged Group will not, accept customers or advertise, particularly where regulatory sanctions against such providers who take a more aggressive approach are ineffective or inadequate. Any of these factors may have a material adverse effect on the business, results of operations, financial condition and prospects of the Enlarged Group.

The ability of the 888 Group, and following Completion, the Enlarged Group, to expand its online betting and gaming business into new jurisdictions is dependent on a number of factors beyond the 888 Group's and, following Completion, the Enlarged Group's control, such as the adoption of regulation permitting online betting and gaming activities and obtaining required licences. There are jurisdictions where the 888 Group and the Target Business are not currently present and incumbent providers established in those jurisdictions, which are opening their markets may seek to take legal action to delay or prevent the liberalisation of the market, making it more difficult for foreign online providers like the Enlarged Group to enter these new markets. While such changes may present new entrants and incumbent providers with access to new customers and opportunities for expansion, the increased product complexity coupled with the increased costs of complying with heightened regulation as well as the imposition of gaming taxes on operators can also make it more difficult for new entrants, strengthening the position of existing betting and gaming operators who have the resources to comply with heightened regulation. A significant increase in competition from both new entrants and existing operators may have a material adverse effect on the business, results of operations, financial condition and prospects of the Enlarged Group.

The regulatory risks to the Enlarged Group may be greater where it has a physical presence.

The Enlarged Group will have a physical presence in 12 jurisdictions. The 888 Group's headquarters is located in Gibraltar, its licensed entities are located in Gibraltar, Malta, Spain (Ceuta) and the US, and the IT functionality to run its betting and gaming operations is located in Gibraltar and Ireland. Additional service functions are located in Israel, Romania, Ireland, Spain (Ceuta), the US (New Jersey) and the UK. The Target Business' licensed entities are located in the UK, Gibraltar and Malta. Additional service functions of the Target Business are located in the UK, Bulgaria, Poland, Italy, Spain and the Philippines. It also operates from LBOs in the UK.

Local authorities are more likely to focus on businesses, which have a physical presence in their jurisdiction since it is easier for such authorities to bring or enforce actions against such businesses and freeze their assets if local laws are violated. Any breach of local laws by the Enlarged Group in a jurisdiction in which it will have a physical presence may be more likely to result in enforcement action taken against it, compared to if such breach were to occur in a jurisdiction where it does not have a physical presence. In particular, if the Enlarged Group is unable to utilise its infrastructure to run its betting and gaming operations or its LBOs as a result of successful enforcement action taken by authorities, this could have a material adverse effect on the business, results of operations, financial condition and prospects of the Enlarged Group.

The business of the Enlarged Group may be exposed to litigation proceedings and regulatory and compliance risks in various jurisdictions across the world.

The industry in which the Enlarged Group operates is subject to continuing scrutiny by regulators and other governmental authorities, which may, in certain circumstances, lead to enforcement actions, sanctions, licence suspension and/or revocation or injunctions affecting its ability to continue operations, fines and penalties or the assertion of private litigations, claims and damages.

For example, following a compliance assessment which concluded in October 2020, the UKGC imposed a financial penalty of GBP 9.4 million on the 888 Group in respect of social responsibility and anti-money laundering failings. The Board of 888 continually reviews and considers the regulatory risks faced by the Company (including any potential regulatory and compliance sanctions and associated costs) and has historically recorded appropriate provisions for such risks in its accounts.

Similarly, following a compliance assessment conducted in July and August 2021, the William Hill Group is subject to an ongoing licence review and is addressing certain action points raised by the UKGC in relation to William Hill's social responsibility and anti-money laundering obligations. It has provided the UKGC with an action plan to address the action points raised by them and is in the process of implementing that action plan. In addition, in November 2021, the William Hill Group notified the UKGC of separate areas it plans to address arising from challenges implementing cross-brand self-exclusion processes. The Target Business has recorded a provision of GBP 15.0 million in its financial statements for Target FY 2021 to cover potential cash outflows resulting from any regulatory sanctions and associated costs resulting from this compliance assessment and licence review, noting that the UKGC has a wide range of enforcement powers at its disposal, including the power to request remedial actions, impose fines and suspend licences. Certain licenced entities within the Target Business also have the benefit of an indemnity provided by Caesars under an agreement dated 8 March 2022 to apply to certain losses and costs that may arise in the event any of the relevant operating licences are suspended or are subject to conditions imposed by the UKGC in connection with the licence review.

During the COVID-19 pandemic, the UKGC published aggregated data from operators in the market to add an additional layer of insight on its monitoring and understanding of the risks and impact of the pandemic on gambling behaviour. However, on 23 December 2021, the UKGC advised caution when analysing this data after it emerged it had been supplied incorrect data points by the William Hill Group between March 2020 and September 2021. As a result, the UKGC has confirmed that it is reviewing the regulatory consequences, if any, of the William Hill Group's failure to submit accurate data.

From time to time, the 888 Group and the Target Group are each the target of claims letters and litigation from players seeking to recover losses and attempting to rely on arguments pertaining to the legality of their respective offering in their jurisdiction or to allege claims such as failure to follow responsible gambling procedures or breach of licence conditions. Since 2020, the industry has seen a rising trend of such civil litigation claims in Austria, backed by case law amongst the higher Austrian courts, resulting in such courts being inclined to find in favour of such claims. Certain claim-financing bodies have also started gathering claims against operators. In addition to the uncertain outcome of these cases relating to the compatibility or otherwise of local licencing regimes with applicable EU law, there are also additional uncertainties arising from consumer claims related to (i) the applicable law under which claims in cross border cases should be determined and (ii) the enforceability of disputed judgments obtained in jurisdictions in which neither the 888 Group nor the Target Group trades and/or in which neither business has assets or presence.

As the Target Business is licensed and operates in jurisdictions such as Latvia, where the 888 Group does not, and operates LBOs in the UK, which the 888 Group does not, the Enlarged Group will be subject to legal and compliance risks in more jurisdictions and business lines than the 888 Group alone. While the Company believes that appropriate risk management and compliance programmes have been adopted by the 888 Group and the Target Business, and such programmes will be adopted by the Enlarged Group following Completion, the global and diverse nature of its operations and the fact that such litigation and proceedings are inherently costly and unpredictable, means that the risk is difficult to assess or quantify and legal and compliance risks will continue to exist and additional legal proceedings and other contingencies, the outcome of which cannot be predicted with certainty, will arise from time to time. In addition, it is possible that the Target Group's individual conduct in any specific jurisdiction may have differed from that of the 888 Group and could therefore, following Completion, have an adverse impact on the good standing of the Enlarged Group with the regulatory or enforcement authorities in any such jurisdiction, thereby potentially exposing the Enlarged Group to enforcement action or litigation. Furthermore, the increased visibility of the Enlarged Group, resulting from the increased aggregate volume of its operations, could draw additional scrutiny from governmental and enforcement authorities.

The Enlarged Group may also include contingent liabilities or make provisions in its accounts to provide for such litigation and proceedings; however, the amounts reserved could vary significantly from any amounts actually paid due to the inherent uncertainties of litigation and of the estimation process and therefore any such amount reserved may be inadequate.

Any such litigation or proceedings could result in adverse publicity and a negative outcome in one or more pending proceedings or any future proceedings, which could have a material adverse effect on the businesses, results of operations, financial condition and prospects of the Enlarged Group.

Uncertainty as to the legality of online betting and gaming may deter third-party suppliers from dealing with the Enlarged Group.

The 888 Group, the Target Business and, following Completion, the Enlarged Group, depend on third-party suppliers such as payment processing, telecommunications, advertising, technology, banking and other service providers, including internet service providers and other technology-based service providers. The willingness of such providers to provide services to the Enlarged Group may be affected by each provider's own assessment of the legality of the provision of services to the Enlarged Group of its business or of the online betting and gaming sector, and by political or other pressure brought to bear on such providers. Adverse changes in law or regulation in any jurisdiction may make the provision of such key services to the Enlarged Group unlawful in such jurisdictions. To the extent that third-party suppliers are unwilling or unable to provide services to the Enlarged Group, this may have an adverse impact on its business, results of operations, financial condition and prospects.

The Enlarged Group will depend on banking and payment processing for the success of its business. The introduction of legislation or regulations restricting financial transactions with online betting and gaming operators, other prohibitions or restrictions on the use of credit cards and other banking instruments for online betting and gaming transactions may restrict the ability of the Enlarged Group to accept payment from its customers. For example, in April 2020 the UKGC introduced a ban on credit card transactions for gambling and stricter age verification obligations in an effort to enhance consumer protection. Moreover, in 2021 a number of major banks in Sweden stopped providing services to Swedish-licensed gambling operators indefinitely, including the Target Business, citing, among other things, concerns relating to the money laundering checks in the betting and gaming sector. Such restrictions may also be imposed as a result of concerns related to fraud, payment processing, anti-money laundering or other issues related to the provision of online betting and gaming services. A number of issuing banks or credit card companies may from time to time reject payments to the Enlarged Group that are attempted to be made by its customers. Should such restrictions and rejections become more prevalent, or any other restriction on payment processing be introduced, betting and gaming activity by customers of the Enlarged Group could be adversely affected, which in turn could have a material adverse effect on the business, results of operations, financial condition and prospects of the Enlarged Group.

Given the significance of online betting and gaming to the business of the Enlarged Group, the introduction of legislation, regulations, administrative or court orders requiring internet service providers in any jurisdiction to block access to the websites and products of the Enlarged Group may restrict the ability of customers to access products offered by it. Furthermore, there is a risk that internet service providers and mobile service providers will voluntarily block gaming websites and require customers to opt in. This could reduce the ability to sign up new customers and market via these channels to existing customers. Certain jurisdictions, including Greece, Russia, Hungary and Latvia have already put in place such restrictions. While the Enlarged Group could challenge these restrictions if they are imposed, there is no certainty that any challenge would be successful and such challenges could be lengthy, during which time the Enlarged Group may be restricted from offering its products to customers in those affected jurisdictions and thus lose market share. Should such restrictions be further extended to other jurisdictions or on an EU-wide basis, this could have a material adverse effect on the business, results of operations, financial condition and prospects of the Enlarged Group.

There have been and continue to be attempts by various persons in EU Member States to apply domestic criminal and administrative laws to prevent online gaming operators licensed in other EU Member States from operating in or providing services to customers within their territory; the case law of the Court of Justice of the European Union (the "CJEU") on this issue continues to evolve creating uncertainty for online gaming operators.

There have been, and continue to be, attempts by regulatory authorities, state licensees and monopoly operators in EU Member States to apply domestic criminal and administrative laws to prevent online gaming operators licensed in other EU Member States from operating in or providing services to customers within their respective territories. The 888 Group and the Target Business permit, and following Completion, the Enlarged Group will permit, customers in most EU Member States to access various services provided by the 888 Group, the Target Business and, following Completion, the Enlarged Group. Since 2006, various EU Member States have been subject to infringement proceedings initiated by the European Commission in relation to the laws that they apply to online gaming as being contrary to the EU principles of free movement of services. The application and enforcement of these principles by the CJEU, the domestic courts and regulatory authorities in various EU Member States remain subject to continuing challenge and clarification. There have been, and continue to be outstanding, a considerable number of relevant proceedings before the domestic courts of various EU Member States and the CJEU. The outcomes of these proceedings remain uncertain, some of which may be unfavourable for the Enlarged Group, and it may take years before any of these proceedings are finally decided.

If the jurisprudence of the CJEU continues to increasingly recognise that EU Member States may, subject to certain conditions, restrict the provision of online gaming products by operators licensed in other EU Member States, and if EU Member States take corresponding action to implement such restrictions within their own territory, this may adversely affect the ability of the Enlarged Group to permit customers in a given EU Member State to access one or more of the products of the Enlarged Group and to engage in certain types of marketing activity and customer contact. If national courts of the EU Member States apply this more restrictive interpretation of EU law, the Enlarged Group may have to submit to local licensing, regulation and/or taxation in more EU Member States than is currently the case and/or desist from accepting bets or carrying out marketing activities in certain EU Member States. Any such consequences could potentially have a material adverse effect on the business, results of operations, financial condition and prospects of the Enlarged Group.

If regulatory authorities take actions against customers, this could reduce the demand for the product offerings of the Enlarged Group.

There are a number of markets in which the 888 Group and the Target Business have, and in which, following Completion, the Enlarged Group will have, customers where it may be illegal or may become illegal under domestic laws for individuals to engage in online gaming or betting. To date, regulatory agencies have been reluctant to enforce these laws against private individuals. Any attempt in the future by regulatory authorities to enforce such provisions against private individuals could significantly affect demand for the services provided by the Enlarged Group and thereby have a material adverse effect on the business, results of operations, financial condition and prospects of the Enlarged Group.

Failure to adequately comply with the relevant laws and regulations of the betting and gaming industry could have a material adverse effect on the business, results of operations, financial condition and prospects of the Enlarged Group.

The legality of betting and gaming is subject to uncertainties arising from differing approaches among jurisdictions as to the determination of where betting and gaming activities take place and which authorities have jurisdiction over such activities and/or those who participate in or facilitate them. The determination by the 888 Group, the Target Business and, following Completion, the Enlarged Group as to whether or not to permit customers in a given jurisdiction to access any one or more of their products and whether or not to engage in different types of marketing activity and customer contact is, and will be, made on the basis of a measured and prudent approach to regulatory compliance and in accordance with the policy adopted by the respective board. Such decisions are based on a number of factors, which include:

· the laws and regulations of the jurisdiction;

· state, federal, national or supra-national law, including EU law if applicable;

· the approach to the application or enforcement of such laws and regulations by regulatory and other authorities, including the approach of such authorities to the extraterritorial application and enforcement of such laws and the willingness or ability (or absence thereof) of such authorities to take enforcement action;

· the terms of the betting and gaming licences of the 888 Group, the Target Business and, following Completion, the Enlarged Group (as applicable);

· any offline presence or retail operations in the jurisdiction; and

· any changes to these factors.

There is a significant risk that the assessment of the factors referenced above may not always accurately predict the likelihood of one or more jurisdictions taking adverse or enforcement action against the Enlarged Group and/or its customers or third-party suppliers. For further details, see the risk titled "The regulation and legality of betting and gaming varies from jurisdiction to jurisdiction, is subject to uncertainties, changes and requirements in many jurisdictions, and approaches to enforcement vary from jurisdiction to jurisdiction".

Any such action may result in the illegality of the activity undertaken by the Enlarged Group and its customers or third-party suppliers, being established.

Failure to comply with relevant laws, regulations and licensing requirements may lead to formal warnings, penalties, sanctions, the imposition of licence conditions or ultimately the suspension or revocation of relevant operating licences. The compliance costs associated with these laws, regulations and licensing requirements are significant. For example, the 888 Group has previously exited or partially exited certain markets which were considered immaterial in the context of its wider business due to adverse regulatory changes.

In regulated jurisdictions, gaming duties are imposed on licensed operators. In addition, regulated jurisdictions may also impose local presence or local partnering requirements, which may result in corporate tax and value added (or similar) tax implications (where applicable). For example, in many US states the 888 Group were required to contract with locally licensed terrestrial casinos in order to provide access to their respective online offerings, as a service provider rather than operator, to residents of those states. Similar requirements may apply to the Enlarged Group and may, therefore, reduce the profitability of operating in such markets.

If the Enlarged Group is found by a court to be acting unlawfully in carrying out marketing activities or offering its products to customers located in a particular jurisdiction, it may have to desist from doing so, which will have a negative effect on operations and financial performance of the Enlarged Group. There may also be additional civil, criminal or regulatory proceedings brought against the Enlarged Group as well as its Directors or management as a result. Any such proceedings would potentially have cost, resource and reputational implications, and could potentially have a material adverse effect on the business, results of operations, financial condition and prospects of the Enlarged Group and on its ability to retain, renew or expand their portfolio of licences. Moreover, even if successfully defended, the process may result in the Enlarged Group incurring considerable costs, requiring significant management resource and time and impacting its relationship with the regulators. An inability to adequately comply with the relevant laws and regulations of the relevant industry of the Enlarged Group could potentially have a material adverse effect on the business, results of operations, financial condition and prospects of the Enlarged Group.

Adverse changes to the taxation of betting and gaming or the imposition of statutory levies or other duties or charges could have a material adverse effect on the business, results of operations, financial condition and prospects of the Enlarged Group.

Jurisdictions in which betting and gaming is regulated impose gaming duties on licensed operators. If the rates of such taxes, duties or levies were to be increased or if the tax base were to be widened, this may have a material adverse effect on the overall tax burden of the Enlarged Group. For example, in 2020 the Italian government imposed a 0.5 per cent. betting turnover tax across all sports wagering verticals (retail, online and virtual sports) as a year-long measure as part of Italy's economic recovery from the COVID-19 pandemic which applied until the end of 2021 and in 2021 in Germany a gaming tax was introduced at a rate of 5.3 per cent. of bets and in Denmark its existing gaming tax was increased from a rate of 20 per cent. of gross gaming revenue to 28 per cent. of gross gaming revenue.

Following the COVID-19 pandemic, there is a risk that governments will look to further increase taxes and gaming duties, as well as other tax rates, in order to raise additional tax revenue in response to the significant increase in public spending that has resulted from the COVID-19 pandemic. As well as any direct impact on the 888 Group, the Target Business and, following Completion, the Enlarged Group of any increase in taxes and gaming duties, any increase in general taxation and inflation may result, among other things, in a decrease in consumers' disposable income and a loss of confidence in the economy which may impact discretionary consumer spending and may have a material adverse effect on the 888 Group's, the Target Business' and, following Completion, the Enlarged Group's business, results of operations, financial condition and prospects.

In addition, jurisdictions in which the Enlarged Group seeks to be licensed may condition such licensing on the retroactive payment of tax allegedly payable on revenue generated by an applicant for licensing from customers in such jurisdictions during a prior period. Legal challenges to such attempts could be lengthy, thereby delaying the award of a licence conditional on the outcome of such challenge and restricting the access of the Enlarged Group to such markets or resulting in a loss of market share.

The imposition of statutory levies or other duties on betting and gaming operators, whether as a result of changes in taxation of betting and gaming or as a condition to licensing, could lower margins and make it more difficult for the Enlarged Group to obtain a licence and operate in certain jurisdictions, which could have a material adverse effect on its business, results of operations, financial condition and prospects.

Recent and potential changes to rules regarding cross-border taxation, the revised interpretation of existing tax rules or increased scrutiny of existing structures could increase the tax liability of the Enlarged Group.

With the exception of the Company (see further below) and also of William Hill Cayman Holdings Limited and Caesars Cayman Finance Limited, entities in the Target Business which are incorporated in the Cayman Islands but treated as resident in the United Kingdom for tax purposes, other legal entities in the Enlarged Group are expected to be and remain tax residents of the jurisdiction in which they are respectively incorporated or registered, and to have no taxable presence in or be subject to the taxing rights of any other jurisdiction. If any group company is found to have a taxable presence outside of the jurisdiction in which it is intended to be tax resident, whether on the basis of existing law or the current practice of any tax authority or by reason of a change in law or practice, including through changes to the OECD's guidelines and/or recommendations, this may have a material adverse effect on the amount of income tax or VAT payable by the Enlarged Group. Since January 2022, as resolved at an extraordinary general meeting of the Company on 16 December 2021, the affairs of the Company have been conducted so that the central management and control of the Company is exercised in the United Kingdom. As a result, from January 2022 the Company has ceased to be treated as Gibraltar tax resident and instead has been treated as resident in the United Kingdom for tax purposes. Accordingly, the Company is now subject to the UK tax laws applicable to holding companies resident in the UK, including the UK controlled foreign companies regime, and its tax position may be affected by future changes in UK tax laws and/or their interpretation and application by the UK tax authorities.

In addition, it is the policy of the 888 Group and the Target Business, and will be the policy of the Enlarged Group, that the pricing of any arrangements between the group companies, such as intra-group provision of services, are intended to be established on an arm's length basis. However, if the tax authorities in the relevant jurisdictions do not regard the arrangements between any of the group companies as being made at arm's length or insofar as changes occur in transfer pricing regulations or in the interpretation of existing transfer pricing regulations, including through changes to the OECD's guidelines and/or recommendations, the amount of tax payable by the Enlarged Group may increase materially. During 2021, the 888 Group subsidiary in Israel finalised an assessment agreement with the Israeli Tax Authority which applies to tax years 2016-2020.

The customers of the 888 Group, the Target Business and, following Completion, the Enlarged Group, are, and will be, located across the world. Revenues earned from customers located in a particular jurisdiction may give rise to direct or indirect taxes in that jurisdiction. If jurisdictions where betting and gaming winnings are currently not subject to income tax or are taxed at low rates were to begin to levy taxes or increase the existing tax rates on winnings or impose a tax withholding or reporting obligation on operators in such respect, online betting and gaming might become less attractive for customers in those jurisdictions. The levying of additional taxes, either on the basis of existing law or the current practice of any tax authority or by reason of a change in law or practice, may have a material adverse effect on the amount of tax payable by the Enlarged Group.

Heightened attention has been given at national and supranational levels, including through the G20 / OECD Base Erosion and Profit Shifting project ("BEPS"), as well as in other public forums and the media, with regard to matters of cross-border taxation, and in particular, to taxation of the digital economy. In December 2021, the OECD published the Pillar Two model rules for domestic implementation of 15 per cent. global minimum tax, and the EU followed suit shortly thereafter. It is expected that the OECD will release the commentary relating to the model rules in 2022 and address co-existence with the US Global Intangible Low-Taxed Income (GILTI) rules. This will be followed by the development of an implementation framework focused on administrative, compliance and co-ordination issues relating to Pillar Two. It is expected that the global minimum tax will be implemented at national level by 2023. The Pillar Two rules, once implemented, are expected to apply to the 888 Group, the Target Business and, following Completion, the Enlarged Group, along with detailed transfer pricing reporting and exchange of tax information rules known as "Country by Country Reporting", insofar as the annual revenues of the 888 Group, the Target Business and, following Completion, the Enlarged Group exceed EUR 750 million. The related Pillar One rules are not expected to apply to the Enlarged Group.

The UK implemented the offshore receipts in respect of intangible property rules imposing UK tax on the receipt of royalties by offshore companies deriving from business activity in the UK. Gibraltar and Malta transposed the EU Anti-Tax Avoidance Directive into domestic law, including changes with respect to exit tax, General Anti-Abuse Rules and Controlled Foreign Corporation rules. Due to pressure from the European Union, many offshore jurisdictions have introduced "substance" requirements including with regard to intangible property companies. The likelihood of scrutiny of tax practices by tax authorities in relevant jurisdictions and the aggressiveness of tax authorities remains high.

In this context, the Enlarged Group expect to be subject to increased reporting requirements regarding its international tax structure.

In addition, UK legislation in respect of Diverted Profits Tax means that in circumstances where profits are deemed "diverted" from the UK under the terms of such legislation, tax at a rate of 25 per cent. (increasing to 31 per cent. from 1 April 2023) is imposed on profits which would be attributable to a permanent establishment ("PE") in the UK were an "avoided PE" to exist for the purposes of the legislation, or on profits diverted from the UK by way of intra-group transactions having inadequate economic substance. Whilst the 888 Group carries out its operations from Gibraltar and has a considerable presence in Gibraltar, elements of the 888 Group's and the Target Business' respective businesses, such as LBOs, bingo-related services, marketing support, payments and other activities, are carried out from the UK by subsidiaries which are established in the UK, remunerated in accordance with arm's length transfer pricing and which are fully taxable in the UK. The aggregate UK presence of the Enlarged Group may give rise to increased exposure to taxation in the UK and the Enlarged Group could be deemed to have a reporting and/or tax payment obligation under the Diverted Profits Tax legislation insofar as such UK-based operations are deemed to constitute an "avoided PE" of any of the non-UK Enlarged Group companies in the UK, as defined in the legislation, or that intra-group transactions involving UK entities are deemed to lack adequate economic substance as contemplated under the legislation.

Any changes in the rules regarding cross-border taxation or the revised interpretation of existing tax rules could increase the tax liability of the Enlarged Group and have a material adverse effect on its business, results of operations, financial condition and prospects.

The systems and controls of the Enlarged Group to restrict access to its products may not be adequate.

The 888 Group and the Target Business use multiple technological methods to block customers from certain jurisdictions. These systems and controls are intended to ensure that no bets are accepted from customers located in those jurisdictions, such as the US (except in states where licences are held), Turkey and Israel where the 888 Group and/or the Target Business have made a decision not to offer all or certain of their products and services. These systems and controls could fail, be subject to manipulation, or otherwise be found to be inadequate, either currently or as a result of future technological developments. This may result in violations of applicable laws or regulations. Any claims in respect of any such violations could have cost, resource, and, in particular if successful, reputational implications, as well as implications on the ability of the Enlarged Group to retain, renew or expand its portfolio of licences in other jurisdictions, and so have a material adverse effect on the business, results of operations, financial condition and prospects of the Enlarged Group.

Online betting and gaming contracts may be unenforceable.

In several of the key markets, such as Austria and Germany, of the 888 Group and the Target Business, online betting and gaming contracts are deemed by courts of law either to be null and void or unenforceable. The civil litigation claims in Austria referred to in the risk factor in this section titled "The business of the Enlarged Group may be exposed to litigation proceedings and regulatory and compliance risks in various jurisdictions across the world" are an example of such litigation. Although the choice of law clauses in end-user terms and conditions stipulate that betting and gaming transactions take place in the location of the operator, there is a risk that customers who have placed bets on an online betting and gaming site could later demand to recover the funds that they have wagered from the operators of the site. If such claims were successful, it could encourage others to bring similar claims, which could have a material adverse effect on the business, results of operations, financial condition and prospects of the Enlarged Group.

The Enlarged Group may be exposed to contractual claims arising from regulatory action.

Each of the 888 Group and the Target Business has entered into agreements with service providers in relation to, among other things, the marketing of each of its products and the processing of payments. The 888 Group and the Target Business have also entered into sponsorship agreements with individuals, companies or entities that they have agreed to sponsor. Many of these agreements contain warranty, indemnity and termination provisions that the counterparties to the agreements may rely on in circumstances where, for example, the validity of a licence held by the 888 Group or the Target Business, as the case may be, is disputed (whether as a result of judicial proceedings, a change in law or otherwise), or where regulatory action is taken against the counterparty.

Neither the 888 Group nor the Target Business has faced material claims of this nature to date. However, if such claims are made, or action is taken, and counterparties were to rely on the relevant warranty, indemnity or termination provisions, the 888 Group, the Target Business and, following Completion, the Enlarged Group could be faced with material damages or indemnity claims. The Enlarged Group may also remain liable for any outstanding fees payable to the counterparty of an agreement, which has been terminated without receiving any value for such fees. The termination of one or more of such service or sponsorship agreements and any damages claims brought by the counterparties to such agreements could have a material adverse effect on the business, results of operations, financial condition and prospects of the Enlarged Group.

RISKS RELATING TO THE BUSINESS and OPERATIONS OF THE 888 GROUP, THE TARGET BUSINESS AND, FOLLOWING COMPLETION, THE ENLARGED GROUP

The 888 Group, the Target Business and, following Completion, the Enlarged Group will be exposed to the risk of competition.

The betting and gaming industry, and in particular the online betting and gaming industry, is highly competitive and the 888 Group, the Target Business and, following Completion, the Enlarged Group may be unable to predict, or adequately plan for, the strategies of its competitors. If the 888 Group, the Target Business and, following Completion, the Enlarged Group is unable to compete effectively, it may lose customers and may not be able to attract new customers. The competitors of the 888 Group, the Target Business and, following Completion, the Enlarged Group may address or implement new technologies before the 888 Group, the Target Business and, following Completion, the Enlarged Group respectively is able to do so or may implement them in a more successful way. The 888 Group, the Target Business and, following Completion, the Enlarged Group may be unable to respond quickly or adequately to changes in the industry brought on by new products and technologies, the availability of products on other technology platforms and marketing channels, the introduction of new website features and functionality, new technology or new marketing and promotional efforts by its competitors. There can also be no certainty that existing, proposed or as yet undeveloped technologies will not become dominant in the future or otherwise displace the services of the 888 Group, the Target Business and, following Completion, the Enlarged Group or render them obsolete. If the 888 Group, the Target Business and, following Completion, the Enlarged Group is not able to compete effectively with current or future competitors with superior technology, this could have a material adverse effect on its business, results of operations, financial condition and prospects.

Whilst the Company believes the Proposed Acquisition will strengthen the 888 Group's, the Target Business' and, following Completion, the Enlarged Group's competitive position, there will be challenges from new and existing competitors who may have larger customer bases and greater brand recognition. In addition, the 888 Group, the Target Business and, following Completion, the Enlarged Group will be at risk from further consolidation in the industry, which might result in the formation of a very large and significant competitor to whom the 888 Group, the Target Business and, following Completion, the Enlarged Group respectively might lose market share. Other competitors may have significantly greater financial, technical, marketing and other resources than the 888 Group, the Target Business and, following Completion, the Enlarged Group and may be able to secure greater liquidity than the 888 Group, the Target Business and, following Completion, the Enlarged Group respectively. A loss of market share could have a material adverse effect on the business, results of operations, financial condition and prospects of the 888 Group, the Target Business and, following Completion, the Enlarged Group.

The COVID-19 pandemic could have enduring effects on the business, financial condition, results of operations and prospects of the 888 Group, the Target Business and, following Completion, the Enlarged Group.

The outbreak of COVID-19, which was declared a pandemic by the World Health Organization on 11 March 2020, has created very significant challenges for companies given its widespread adverse global economic, social and operational impact, the long-term effects of which are continuing to unfold.

Due to the multinational nature of the business of the 888 Group and the Target Business and, following Completion, the Enlarged Group, the COVID-19 pandemic has and may continue to impact the ability of their personnel to maintain their health and wellbeing, successfully carry out their roles from their respective offices or remote locations and travel between sites. Additionally, if one or several of the 888 Group's, the Target Business' and, following Completion, the Enlarged Group's key executive members were to contract COVID-19, this could negatively impact ability of the 888 Group, the Target Business and, following Completion, the Enlarged Group, respectively, to execute on its business strategy.

The social distancing restrictions, public gathering restrictions and lockdown restrictions introduced in the UK in response to the COVID-19 pandemic had a material impact on the operation and profitability of land-based betting and gaming segments, including the LBO portfolio of William Hill Retail during 2020 and the first half of 2021. For further details, see the risk factor in this section titled "William Hill Retail operates and, following Completion, the Enlarged Group will operate, a large portfolio of LBOs in the UK, which carry significant fixed overhead costs and may be adversely affected by regulatory change, the ongoing COVID-19 pandemic or other factors that could impact the operations and profitability of the LBO portfolio".

Even before the COVID-19 pandemic, retail participation in betting and gaming has declined over time as customers have gravitated towards the convenience of online gambling. Land-based and online offerings tend to appeal to different demographics, with online attracting younger, more affluent audiences. Historically, there has been limited movement of land-based players towards online platforms. However, in the longer term, as current land-based customers age, there is expected to be a continued slow structural transition online given the preferences of younger cohorts.

In addition to the long-term structural shift online, COVID-19 has introduced a number of retail players to online gambling. Growth in online participation was driven by both new gamblers and shift of land-based players to online during periods of lockdown. A survey conducted by Populus (now known as Yonder) for the UKGC in August 2020 found that during lockdown approximately 4 per cent. of non-gamblers started gambling online and approximately 8 per cent. of land-based gamblers moved online.

As the COVID-19 pandemic abates, its impact on customer behaviour, including with respect to the operations of William Hill Retail, and their preferences may continue in the longer term. Furthermore, in the event of a prolonged global macro-economic downturn resulting from the COVID-19 pandemic, consumer spending across the 888 Group's and the Target Business' and, following Completion, the Enlarged Group's online betting and gaming product verticals may also become impacted.

Any of the foregoing, including any resulting deterioration in general economic conditions or change in consumer behaviour, could have a material adverse effect on the business, results of operations, financial condition and prospects of the 888 Group and the Target Business and, following Completion, the Enlarged Group.

The business, results of operations, financial condition and prospects of the 888 Group and the Target Business depend on and, following Completion, the Enlarged Group will depend on, the scheduling and live broadcasting of major sporting events, which have been impacted by the ongoing COVID-19 pandemic.

The scheduling of certain major sporting events occurs seasonally (for example, UK horse racing and football) or otherwise at regular but infrequent intervals (for example, the FIFA World Cup or the Rugby World Cup). Disruption to, cancellation, postponement or curtailment of significant sporting events as a result of the COVID-19 pandemic or other factors, such as bribery and corruption investigations, adverse weather conditions, terrorist acts, other acts of war or hostility or the outbreak of further infectious diseases; or cancellation, disruption to, or postponement of the live broadcasting of such sporting events, for example, due to contractual disputes, technological or communication problems, or the insolvency of a major broadcaster, could have a material adverse effect on the business, results of operations, financial condition and prospects of the 888 Group, the Target Business and, following Completion, the Enlarged Group.

The COVID-19 pandemic has resulted in, and may continue to result in, the cancellation or postponement of major sporting events globally or the requirement that major sporting events be held without fans present. For example, in December 2021, a significant number of matches in the English Premier League and Championship were postponed or cancelled following players testing positive for COVID-19, and similar disruption to professional sporting events was also experienced elsewhere in Europe and the United States. Such disruption followed an increase in infection rates driven by the spread of the Omicron variant of COVID-19. Further disruptions to the scheduling and broadcasting of such sporting events may, therefore, have a material adverse impact on the results of operations of the 888 Group, the Target Business and, following Completion, the Enlarged Group.

William Hill Retail operates and, following Completion, the Enlarged Group will operate, a large portfolio of LBOs in the UK, which carry significant fixed overhead costs and may be adversely affected by regulatory change, the ongoing COVID-19 pandemic or other factors that could impact the operations and profitability of the LBO portfolio.

Unlike the existing business of the 888 Group, which provides an online-only offering to its customers, the William Hill Retail division of the Target Business operates a portfolio of 1,407 LBOs in the UK as at 28 December 2021. This portfolio consists of a mixture of leasehold and freehold sites at which, as at 28 December 2021, approximately 10,113 (6,127 full-time and 3,986 part-time) staff are employed by the Target Group, resulting in significant fixed overhead costs. William Hill Retail has been adversely affected by regulatory change in recent years. With effect from April 2019, new regulations were introduced in the UK reducing the staking limits on B2 gaming products from GBP 100 to GBP 2 per bet. This reduced the revenues at LBOs within the William Hill Retail portfolio and resulted in the Target Group permanently closing 713 LBOs during Target FY 2019.

Furthermore, the social distancing restrictions, public gathering restrictions and lockdown restrictions introduced in the UK in response to the COVID-19 pandemic resulted in the closure of all of the Target Business' LBOs from 20 March 2020 until 15 June 2020, followed by localised closures before a further nationwide closure of LBOs from 5 November 2020 until 2 December 2020, then followed by further localised closures which continued into 2021. Even when open between these periods, LBOs were often subject to restrictions on trade including a cessation in live sporting events and limitations on the number of gaming machines that could be operational in each LBO with restrictions varying by location of the LBOs in question. In April 2020, the Target Business also furloughed 7,644 staff under the job support scheme introduced by the UK government in response to the COVID-19 pandemic, with the Target Group topping up the amounts that employees received under the scheme to ensure that each employee received their full salary while furloughed. Although the amounts received under the job support scheme have since been repaid to the UK government by the Target Business, these measures had a material impact on the operation and profitability of the LBO portfolio during 2020 and into 2021, and resulted in the decision to permanently close a further 119 LBOs during Target FY 2020.

These changes have accelerated an existing ongoing trend where land-based retailers and other businesses in city and town centres, where certain LBOs are based, are experiencing lower footfall as consumers are increasingly migrating their demand for services toward online offerings.

Further regulatory change or the re-introduction or furthering of restrictions in response to the COVID-19 pandemic could further impact the operation and profitability of the LBO portfolio of William Hill Retail, and following Completion the Enlarged Group, which could have a material adverse impact on the business, results of operations, financial condition and prospects of William Hill Retail, and following Completion, the Enlarged Group. This may result in the need to permanently close further LBO sites, which would result in a rise in associated costs and expenses and a longer-term reduction in revenue from the LBO portfolio of William Hill Retail, and following Completion the Enlarged Group.

The LBOs operated by William Hill Retail will subject the Enlarged Group to additional regulation that does not apply to the current operations of the 888 Group.

The operation of William Hill Retail through its LBOs depend on operating licences, personal management licences and premises licences. The Target Group's relevant subsidiary, applicable personnel and LBOs currently hold all requisite licences and other approvals in the UK. Under the UK regime, licences are given for an indefinite period, subject to the payment of annual fees, and are normally only terminated in the event of a breach of the terms of the licence or other regulatory violation by the holder. There can be no assurance, however, that the UKGC will not terminate licences already granted, or otherwise change its licensing requirements or that the UK government will not introduce new laws or regulations applicable to gambling companies or change existing laws or regulations. In addition, regulation of gaming machines in the UK continues to have a high profile in the media and among politicians. If the UKGC were to terminate any of the licences already granted, or otherwise change the licensing requirements of William Hill Retail and, following Completion, the Enlarged Group, the foregoing may be required to expend significant capital or other resources to comply with the new requirements and/or may be unable to meet the new requirements, either or a combination of which could have a material adverse effect on the business, results of operations, financial condition and prospects of William Hill Retail, and following Completion, the Enlarged Group respectively.

The 888 Group, the Target Business and, following Completion, the Enlarged Group may be exposed to foreign exchange rate fluctuations and foreign exchange rate risks in terms of its financial reporting.

A substantial part of the 888 Group's and the Target Business' deposits and revenues are generated in and, following Completion, the Enlarged Group's deposits and revenue will be generated in, GBP, EUR and other currencies, and the 888 Group's and the Target Business' operating expenses are and, following Completion, the Enlarged Group's operating expenses will be, largely incurred in local currencies, primarily GBP, EUR, NIS and Romanian leu with incremental exposure to operating expenses in Swedish krona and Polish zloty. The 888 Group and the Target Business have and, following Completion, the Enlarged Group will also have, debt servicing costs, which are denominated in GBP, USD and EUR. As a result of this, the 888 Group and the Target Business are exposed to and, following Completion, the Enlarged Group will be more exposed to, the impact of foreign currency fluctuations. The 888 Group and the Target Business mitigate and, following Completion, the Enlarged Group will mitigate, its exposure to the impact of foreign exchange fluctuations on its cost base by adopting policies to hedge certain costs and will also have additional costs denominated in GBP and EUR which will provide an additional natural hedge. In addition, in connection with the Proposed Acquisition, the 888 Group intends to enter into deal contingent FX forwards pursuant to which it will convert the EUR or USD amounts drawn under the Senior Facilities Agreement for the purpose of funding the Proposed Acquisition into GBP for delivery to the Seller on Completion. In addition, the 888 Group may choose to enter into additional FX or cross currency swaps in order to hedge its ongoing EUR and/or USD exposure under the Senior Facilities Agreement following Completion. However, there can be no assurance that such hedging will eliminate the potentially material adverse effect of such fluctuations.

The Proposed Acquisition will materially increase the indebtedness of the 888 Group and, following Completion, the Enlarged Group and such indebtedness and the terms of the finance documents may impair certain operational flexibility and limit the Enlarged Group's ability to pay dividends in the absence of obtaining lender consent. 

The Company and JPMorgan Chase Bank, N.A., London Branch, Morgan Stanley Senior Funding, Inc. and Mediobanca - Banca di Credito Finanziario S.p.A. on 9 September 2021 entered into the Commitment Letter, which was subsequently amended and restated on 1 October 2021 to reflect the addition of Barclays Bank PLC as an additional Commitment Party thereunder, to provide the Company with additional relevant financing to undertake the Proposed Acquisition, including the repayment of certain existing indebtedness of the Target Business (including, among other things, the redemption of the Existing 2023 Notes following Completion). Under the Commitment Letter, the Lenders undertake to make available to the Company the following commitments on a customary certain funds basis:

· term loan facilities in an aggregate principal amount of GBP 1.64 billion (equivalent) (Facility B);

· a multicurrency revolving credit facility in the aggregate principal amount of GBP 150 million; and

· GBP 500 million in the form of a bridge loan.

In light of the revised consideration amount for the Proposed Acquisition pursuant to the Amendment Deed, the Company's overall financing requirements were correspondingly reduced. Further, and in lieu of drawing a proportion of the committed debt financing described above, the 888 Group raised net proceeds of GBP [ ˜ ] million by way of the Placing on [7] April 2022, to enable the Company to target pro forma net leverage of under 4x.

The Board has set a goal of achieving a pro forma net leverage ratio of at or below 3x in the medium term. Along with the strong free cash flow expected to arise from the Proposed Acquisition, the Board intends to accelerate de-leveraging by suspending dividend payments until such time as the net leverage ratio is at or below 3x (or such earlier time as the Board considers appropriate).

It is also expected that the Company will part finance the Proposed Acquisition by entering into the Senior Facilities Agreement with each of the relevant Lenders prior to Completion with respect to borrowings in the amount of up to GBP 1.64 billion (equivalent) under Facility B. The aggregate amount of up to GBP 1.64 billion (equivalent) of Facility B includes a delayed draw facility in the amount of GBP 350 million that is only available to the Company for 120 days following Completion to finance any put option or early optional redemption exercised by the holders of the Existing 2026 Notes following Completion.

It is also proposed that the Senior Facilities Agreement will include the provision of borrowings in the amount of GBP 150 million under the Revolving Credit Facility to be used for working capital and general corporate purposes.

In addition, and in lieu of a portion of Facility B and/or the bridge loan described above, the Company is expected to part finance the Proposed Acquisition by entering into a Second Lien Facility Agreement with each of the relevant Lenders prior to Completion with respect to borrowings in the amount of up to GBP 200 million (equivalent).

As a result of the arrangements described above the Enlarged Group will be subject to restrictive covenants (normal for debt facilities of this nature), limiting its ability and the ability of certain restricted subsidiaries to, among other things, incur additional debt, create liens, pay dividends, redeem capital stock or make certain other restricted payments or investments, enter into agreements that restrict dividends from restricted subsidiaries, sell assets, including capital stock of restricted subsidiaries, engage in transactions with affiliates and effect a consolidation or merger. Where the Enlarged Group wishes to enter into a transaction or undertake corporate action which is not permitted under such covenants it will need to obtain the prior consent of the lenders and/or noteholders and there can be no guarantee that such consent would be obtained. This may impact on certain operational and financial flexibility that the Enlarged Group would otherwise have with respect to (among other things) making minority or joint venture investments, granting security, making acquisitions, entering into mergers, making disposals or incurring financial indebtedness, in each case unless such matter is expressly carved-out from the relevant restrictive covenant or can be accommodated within the customary general baskets, materiality thresholds and, where applicable, debt incurrence ratios provided for in the finance documents.

The Enlarged Group will be subject to interest rate risk.

The borrowings of the Enlarged Group under Senior Facilities Agreement will be subject to a variable interest rate and therefore the Enlarged Group will be exposed to fluctuations in market interest rates. While the Enlarged Group may be able to enter into hedging arrangements, including swap contracts that would result in the Enlarged Group being exposed to a fixed interest rate rather than a variable interest rate, there can be no assurance that this is possible at a reasonable price or at all and significant increases in the interest rate payable in respect of amounts outstanding under such facilities could have a material adverse effect on the business, results of operations, financial condition and prospects of the Enlarged Group.

Negative publicity surrounding the betting and gaming industry may adversely affect the reputation and business of the 888 Group, the Target Business and, following Completion, the Enlarged Group.

The 888 Group, the Target Business and, following Completion, the Enlarged Group may be adversely affected by negative publicity surrounding the betting and gaming industry and in particular, play by vulnerable customers. The visibility of the Enlarged Group compared to that of each of the 888 Group or the Target Group on a standalone basis, resulting from the increased aggregate volume of its operations, could be increased and therefore draw additional publicity and attention. The attraction of betting and gaming to some minors and customers for whom betting and gaming activities assume too great a role in their lives poses a challenge, whether via online or retail channels. Broad access to social media makes it easy for anyone to provide public feedback that can influence perceptions of the betting and gaming industry, the 888 Group, the Target Business and, following Completion, the Enlarged Group. If the perception persists that the online betting and gaming industry or the betting and gaming industry as a whole is failing to adequately protect minors and vulnerable customers, then further restrictions on the provision of betting and gaming services to such customers may be imposed on the 888 Group, the Target Business and, following Completion, the Enlarged Group, which could have a material adverse effect on its business, results of operations, financial condition and prospects. Damage to the betting and gaming industry's reputation could also lead to a lack of support for the betting and gaming industry from governments and other legislative bodies and from the public, all of which may have a material adverse effect on the business, results of operations, financial condition and prospects of the 888 Group, the Target Business and, following Completion, the Enlarged Group, as would any form of compulsory levy to fund research into, and assistance for, compulsive gamblers. Moreover, it cannot be ruled out that there could be successful claims for damages in the future by which a compulsive gambler or their dependants could recover monies wagered or damages for emotional distress or similar.

Various regulators, most notably the UKGC and the Swedish Gambling Authority (Swedish. Spelinspektionen), have adopted stricter compliance and enforcement policies, conducting more in-depth reviews of operational practices and sanctioning operators found to be non-compliant. For example, in FY 2021, the Target Group was fined EUR 3 million (GBP 2.6 million) by the Swedish Gaming Inspectorate for failing to take sufficient measures with respect to anti-money laundering and problem gambling in customers. There is growing sentiment in various jurisdictions that existing regulations do not sufficiently protect minors and vulnerable customers or do enough to prevent the use of illicitly obtained funds for gambling purposes. More specifically - due to the COVID-19 pandemic, which resulted in a growth in gambling spending and a potential increase in problem gambling prevalence - the industry as a whole has been the subject of increased criticism and the calls for stricter regulation, specifically around responsible gambling and advertising, have intensified. This could result in reputational damage to the 888 Group, the Target Business and, following Completion, the Enlarged Group, as well as in the adoption of stricter regulations and enhanced enforcement measures.

The 888 Group and the Target Business devote, and it is expected the Enlarged Group will devote, resources to putting in place prevention measures coupled with strict internal procedures to protect customers, including restrictions on minors and individuals who have requested to be self-excluded from opening accounts or proceeding to play for real money, but such measures and procedures may not be sufficient or effective. In addition, it is also difficult to ensure that affiliate marketers ethically source reliable data for marketing purposes such that advertising codes can be strictly adhered to and that only appropriate age groups or demographics are targeted.

Any negative publicity surrounding the betting and gaming industry or an increase in scrutiny from regulators could have a material adverse effect on the business, results of operations, financial condition and prospects of the 888 Group, the Target Business and, following Completion, the Enlarged Group.

Political, economic and military conditions in Israel may impede the ability of the 888 and, following Completion, the Enlarged Group to operate or harm its financial results.

The 888 Group has, and following Completion, the Enlarged Group will have, certain subsidiaries located in Israel carrying out research and development, marketing support and certain other functions. Accordingly, political, economic and military conditions in Israel may directly affect the 888 Group and, following Completion, the Enlarged Group's business. Since the establishment of the State of Israel in 1948, a number of armed conflicts have occurred between Israel and its Arab neighbours, most recently in May 2021. While the 888 Group has not suffered any material adverse impact on its business as a result of such events, any hostilities involving Israel or the interruption or curtailment of trade between Israel and its present trading partners could adversely affect the 888 Group's and, following Completion, the Enlarged Group's operations. In addition, pursuant to Israeli law, several of the 888 Group's and, following Completion, the Enlarged Group's employees and key personnel could be called-up for emergency military duty in the event of war or an escalation in hostilities between Israel and its neighbours, which could further disrupt the Israeli operations of the 888 Group and, following Completion, the Enlarged Group respectively. Any escalation in hostilities, or any future-armed conflicts, political instability or violence in the region, could have a material adverse effect on the business, results of operations, financial condition and prospects of the 888 Group and, following Completion, the Enlarged Group.

The ongoing military action between Russia and Ukraine could adversely affect the Group's, and following the Completion, the Enlarged Group's, business, financial condition and results of operations.

On February 24, 2022, Russian military forces invaded Ukraine, and sustained conflict and disruption in the region is likely. Although the length, impact and outcome of the ongoing military conflict in Ukraine is highly unpredictable, this conflict could lead to significant market and other disruptions, including significant volatility in commodity prices and supply of energy resources, instability in financial markets, supply chain interruptions, political and social instability, changes in customer preferences or discretionary spending and increases in cyberattacks and espionage.

Russia's recognition of two separatist republics in the Donetsk and Luhansk regions of Ukraine and subsequent military action against Ukraine have led to an unprecedented expansion of sanction programs imposed by the United States, the European Union, the United Kingdom, Canada, Switzerland, Japan and other countries against Russia, Belarus, the Crimea Region of Ukraine, the so-called Donetsk People's Republic and the so-called Luhansk People's Republic. As the conflict in Ukraine continues, there can be no certainty regarding whether the governmental authorities in the United States, the European Union, the United Kingdom or other counties will impose additional sanctions, export controls or other measures targeting Russia, Belarus or other territories and the 888 Group and the Target Business, and following Completion, the Enlarged Group must be ready to comply with the existing and any other potential additional measures imposed in connection with the conflict in Ukraine. 

The 888 Group and the Target Business are actively monitoring the situation in Ukraine and assessing its impact on their businesses. Neither the 888 Group nor the Target Business have any material operations in Russia or Ukraine and, to date, neither have experienced any material interruptions in their business, financial condition, infrastructure, supplies, technology systems or networks needed to support their operations. However, the 888 Group utilises an outsourcing company located in Ukraine, named Onseo, which has 52 employees that are involved in the 888 Group's Bingo business, which is in the process of being sold to Broadway Gaming group. The operations of the outsourced company have suffered minimal adverse operational impact due to the invasion. The 888 Group has initiated a mitigation plan and is in the process of moving certain operations and knowhow to Israel in response to events. In addition, the 888 Group has blocked access to all its products by all Russians, as well as all IP addresses in Russia, the Crimea Region of Ukraine, the so-called Donetsk People's Republic or the so-called Luhansk People's Republic. Furthermore, in adhering to EU and UK of limitations on amounts able to be held by Russians in EU and UK bank accounts, the 888 Group has adopted a similar idea for Belarussian players and limited deposit sums in a player's account. Similarly, the Target Business has blocked the accounts of its Russian and Belarussian customers and taken steps to remove Russian sporting fixtures from its product offering.

There can be no way to predict the progress or outcome of the conflict in Ukraine or its impacts in Ukraine, Russia or Belarus as the conflict, and any resulting government reactions, are rapidly developing and beyond the 888 Group's control. The extent and duration of the military action, sanctions and resulting market disruptions could be significant and could potentially have substantial impact on the global economy and the 888 Group and the Target Business for an unknown period of time. Any of the abovementioned factors could affect the 888 Group's, Target Business' and, following Completion, the Enlarged Group's business, financial condition and results of operations. Any such disruptions may also magnify the impact of other risks described in this Appendix.

The 888 Group and the Target Business are, and following Completion, the Enlarged Group will be, required to make payments to sporting bodies and event rights holders.

The 888 Group and the Target Business are, and following Completion, the Enlarged Group will be, liable to make contributions to sporting bodies such as the Horserace Betting Levy Board and the British Greyhound Racing Fund in the UK, whether under regulations or agreement, as a way of ensuring certain revenues generated from betting on sports are used to benefit those sports or related interests.

Furthermore, each of the 888 Group and the Target Business enters into contracts with rights holders with regard to the provision of video and video streams, audio and other data for use in its business for the provision of live coverage of sports events. The Enlarged Group is also likely to continue to enter into similar contracts in the future.

The Target Business and, following Completion, the Enlarged Group cannot predict with any certainty what future payments may be required for the success of its businesses in the future and what other additional resources will need to be made available to address any conditions, which impose levies, fees or royalties, the level of which will be outside the control of the Target Business and the Enlarged Group respectively. Given the significance of the betting vertical to the Target Business and, following Completion, the Enlarged Group, any requirement to pay additional levies, fees or royalties could have a material adverse effect on its business, results of operations, financial condition and prospects.

The 888 Group, the Target Business and, following Completion, the Enlarged Group will depend on technology and advanced information systems, which may fail or be subject to disruption.

The integrity, reliability and operational performance of the IT systems of the 888 Group, the Target Business and, following Completion, the Enlarged Group will be critical to its operations. The IT systems of the 888 Group, the Target Business and, following Completion, the Enlarged Group may be damaged or interrupted by increases in usage, human error, unauthorised access, natural hazards or disasters or similarly disruptive events. Furthermore, the current systems may be unable to support a significant increase in online traffic or increased customer numbers, whether as a result of organic or inorganic growth of the business. Any failure of the IT infrastructure of the 888 Group, the Target Business and, following Completion, the Enlarged Group or the telecommunications and/or other third-party infrastructure on which such infrastructure relies could lead to significant costs and disruptions that could reduce revenue, harm the business reputation and have a material adverse effect on the business, results of operations, financial condition and prospects of the 888 Group, the Target Business and, following Completion, the Enlarged Group respectively. In addition, with information and security arrangements shared across a supply chain, the cyber security of any one organisation within the chain is potentially exposed to the vulnerabilities of the weakest member of the supply chain. Therefore, third-party software providers, website builders, data aggregators and B2B partners that are connected to databases of the 888 Group, the Target Business and, following Completion, the Enlarged Group potentially constitute a cyber-risk to the 888 Group, the Target Business and, following Completion, the Enlarged Group respectively. While the 888 Group and the Target Business use, and following Completion, the Enlarged Group will use, multiple technical solutions and common standards to help to mitigate these risks (for example, Payment Card Industry Data Security Standard (PCI DSS)), the possible risk of cyber security vulnerability in the supply chain remains.

The 888 Group and the Target Business have in place, and following Completion, the Enlarged Group will have in place, business continuity procedures, disaster recovery systems and security measures to protect against network or IT failure or disruption. These procedures and measures may however not be effective to ensure that the 888 Group, the Target Business and, following Completion, the Enlarged Group is able to carry on its business in the ordinary course if there is a network or IT failure or disruption, and they may not ensure that the 888 Group, the Target Business and, following Completion, the Enlarged Group can anticipate, prevent or mitigate a material adverse effect on its business, results of operations, financial condition and prospects resulting from such failure or disruption.

Should the IT systems of the 888 Group, the Target Business and, following Completion, the Enlarged Group fail or be subject to disruption, and the 888 Group, the Target Business and, following Completion, the Enlarged Group is unable to carry on its businesses in the ordinary course, there could be a material adverse effect on the business, results of operations, financial condition and prospects of the 888 Group, the Target Business and, following Completion, the Enlarged Group respectively.

The 888 Group, the Target Business and, following Completion, the Enlarged Group may be vulnerable to network failure, disruptions, cyber-crime attacks and customer fraud and significant resources may be required to protect the 888 Group, the Target Business and, following Completion, the Enlarged Group.

The 888 Group, the Target Business and, following Completion, the Enlarged Group may be vulnerable to hacker intrusion, distributed denial of service ("DDoS"), malicious viruses, theft or misuse of data and other cyber-crime attacks, which could result in network failure or disruptions. For example, computer hackers may attempt to gain access to the systems and databases of the 888 Group, the Target Business and, following Completion, the Enlarged Group for the purpose of manipulating results, which may cause systems failure and business disruption. Cyber-attack or data theft incidents may expose the 888 Group, the Target Business and, following Completion, the Enlarged Group to "ransom" demands and costs of repairing physical and reputational damage. Both the 888 Group and the Target Business have in the past, and are likely again in the future, to be subject to these types of cyber-attack attempts and the 888 Group has suffered periods of downtime across a number of services as a result of IT and security weaknesses and third parties, although to date, no such attempt has resulted in any material damage. The 888 Group has not had an opportunity to fully assess the robustness of the Target Business' IT systems generally, or specifically against such attacks. The visibility of the Enlarged Group compared to that of each of the 888 Group or the Target Business on a standalone basis, resulting from the increased aggregate volume of its operations and its profile, could be increased and therefore the threat of cyber-attack attempts may be heightened.

The online betting and gaming industry is also vulnerable to attack by customers through collusion and fraud. Online transactions may be subject to sophisticated schemes or collusion to defraud (including to increase betting and gaming winnings), launder money or other illegal activities, and there is a risk that the products of the 888 Group, the Target Business and, following Completion, the Enlarged Group may be used for those purposes either by their customers or their employees. For example, collusion can be effected between online poker customers adopting sophisticated computer programmes to play games automatically (bots) or by chip dumping (i.e. depositing and losing money against another colluding customer in an attempt to money launder). As the Enlarged Group will have more customers and a greater volume of transactions it may be further exposed to this risk than the 888 Group and Target Business alone.

In order to protect the 888 Group, the Target Business and, following Completion, the Enlarged Group against network or IT failure or disruption, unauthorised access and customer fraud, the 888 Group, the Target Business and, following Completion, the Enlarged Group respectively may be required to expend significant capital or other resources (such as staff and management time and resources and engagement of third party experts and consultants), including the replacement or upgrading of existing business continuity systems, procedures and security measures. The 888 Group, the Target Business and, following Completion, the Enlarged Group will implement, technologies and procedures throughout its technology operations designed to protect its networks from malicious attacks and other such risks. These measures include traffic filtering, anti-DDoS devices and anti-virus protection from leading vendors. Physical and logical network segmentation will also be used to isolate and protect networks and restrict malicious activities. In addition, the 888 Group, the Target Business and, following Completion, the Enlarged Group will also aim to ensure that appropriate protections are in place to detect any intrusion or other security breach. These steps, together with preventative measures safeguarding against sabotage, hackers, viruses and cyber-crime will be essential to the 888 Group, the Target Business and, following Completion, the Enlarged Group. The 888 Group and the Target Business have also implemented, and the Enlarged Group will implement, detection and prevention controls to minimise the opportunities for fraudulent play and are aware of the need to continually monitor and develop such protective measures. Failure to adopt appropriate policies and implement appropriate steps to adequately monitor and prevent money laundering and other fraudulent activity could result in civil or criminal liability for the 888 Group, the Target Business and, following Completion, the Enlarged Group.

Techniques deployed to obtain unauthorised access, or to sabotage or misuse the online betting and gaming systems change and may not be known until launched against the 888 Group, the Target Business and, following Completion, the Enlarged Group or any of their third-party service providers. The 888 Group, the Target Business and, following Completion, the Enlarged Group may therefore not be able to anticipate, or to completely protect against such attacks, especially since such attacks are, by their nature, technologically sophisticated and may be difficult or impossible to detect and defend. If replacements, expansions, upgrades and/or other maintenance are not implemented successfully or completed efficiently or there are operational failures, the quality of the product portfolio of the 888 Group, the Target Business and, following Completion, the Enlarged Group and the service experienced by its customers will be adversely impacted, which could reduce or stop the use by customers of the products and services of the 888 Group, the Target Business and, following Completion, the Enlarged Group respectively. If the protection and prevention measures implemented by the 888 Group, the Target Business and, following Completion, the Enlarged Group were to fail or be circumvented, this could potentially cause the 888 Group, the Target Business and, following Completion, the Enlarged Group respectively to shut down its operations for a period of time until the source of the breach is determined and the situation remediated. The 888 Group, the Target Business and, following Completion, the Enlarged Group could also lose business critical information and could be subject to threats from hackers who could release business critical or other sensitive information to the public that would harm the operations and the reputation of the 888 Group, the Target Business and, following Completion, the Enlarged Group respectively. Any failure by the 888 Group, the Target Business and, following Completion, the Enlarged Group to detect instances of collusion and other fraud may also result in affected customers experiencing increased losses and thus lose confidence in the 888 Group, the Target Business and, following Completion, the Enlarged Group respectively. The occurrence of any of these could have a material adverse effect on the business, results of operations, financial condition and prospects of the 888 Group, the Target Business and, following Completion, the Enlarged Group.

Failure to adequately protect customer account information could have a material adverse effect on the 888 Group, the Target Business and, following Completion, the Enlarged Group.

The 888 Group and the Target Business process and, following Completion, the Enlarged Group will process, personal customer data (including name, address, age, bank details and betting and gaming history) as part of its businesses and therefore must comply with strict data protection and privacy laws in the UK, EU and certain other jurisdictions from which the 888 Group, the Target Business and, following Completion, the Enlarged Group respectively will accept bets. Those laws restrict the ability of the 888 Group, the Target Business and, following Completion, the Enlarged Group to collect, use and transfer personal information relating to customers, potential customers and others, including through the use of cookies or similar technologies or by using such information across different brands, in a way that is of commercial use to the 888 Group, the Target Business and, following Completion, the Enlarged Group respectively. Notwithstanding the technical and organisational measures which the 888 Group and the Target Business have, and, following Completion, the Enlarged Group will have, in place, the 888 Group and the Target Business are, and, following Completion, the Enlarged Group will be, exposed to the risk that personal data could in the future be wrongfully accessed and/or used, whether by employees, customers or other third parties, or otherwise lost or disclosed or processed in breach of data protection and privacy laws.

If the 888 Group, the Target Business and, following Completion, the Enlarged Group fails to adhere to applicable data protection and privacy laws, it may be subject to administrative sanctions and/or civil litigation. In particular, the General Data Protection Regulation (EU 2016/679) (the "EU GDPR") and its transposition into UK and Gibraltar laws by virtue of section 3 of the European Union (Withdrawal) Act 2018 and as amended by Schedule 1 to the Data Protection, Privacy and Electronic Communications (Amendments etc.) (EU Exit) Regulations 2019 (SI 2019/419) (the "UK GDPR") and Gibraltar Data Protection Act 2004 (the "Gibraltar GDPR") (the EU GDPR, the UK GDPR and the Gibraltar GDPR collectively the "GDPR") includes an administrative sanctions regime where non-compliance with GDPR standards under each of the EU GDPR, UK GDPR and Gibraltar GDPR can attract fines of up to EUR 20 million (GBP 17.5 million in the UK and Gibraltar) or four per cent. of annual worldwide turnover (whichever is the higher). Data protection supervisory authorities also have extensive powers under the GDPR, including the power to impose a temporary or definitive ban on processing activity. Data protection supervisory authorities are also able to initiate investigations and audits of entities to assess their compliance with the GDPR. Given the consumer-facing and high-profile nature of the 888 Group, the Target Business and, following Completion, the Enlarged Group, there can be no assurance that data protection supervisory authorities will not investigate and/or audit the 888 Group, the Target Business and, following Completion, the Enlarged Group with respect to data protection and privacy. The GDPR also includes a right to compensation for data subjects who have suffered material or non-material damage as a result of an infringement of the GDPR and in certain cases, civil litigation can be brought by non-profit privacy advocacy groups. Liability can attach to the 888 Group, the Target Business and, following Completion, the Enlarged Group not only for its own non-compliance, but also due to the acts, errors or omissions of those who process personal data in the course of providing services to the 888 Group, the Target Business and, following Completion, the Enlarged Group respectively, as the GDPR includes joint and several liability provisions that apply in certain cases. The same conduct could expose the 888 Group, the Target Business and, following Completion, the Enlarged Group to penalties for breach of data protection laws in multiple jurisdictions.

A breach of GDPR or other applicable data protection laws could also result in the 888 Group, the Target Business and, following Completion, the Enlarged Group being subject to the revocation of existing licences and/or the refusal of new applications for licences. Any fines, civil litigation or licence revocations or refusals arising from a breach of applicable data protection or privacy laws could materially adversely affect the revenue and operating expenses of the 888 Group, the Target Business and, following Completion, the Enlarged Group. There can be no assurances that the 888 Group, the Target Business and, following Completion, the Enlarged Group would be able to recoup such losses, whether in whole or in part, from its service providers or insurers. The occurrence of any such events could also result in reputational damage to the 888 Group, the Target Business and, following Completion, the Enlarged Group resulting in the loss of customer goodwill and confidence and deter new and existing customers. Furthermore, a data breach involving employee data could also cause recruitment and retention challenges, increasing labour costs and affecting the daily operation of the business. Each of these factors could harm the business reputation and have a material adverse effect on the business, results of operations, financial condition and prospects of the 888 Group, the Target Business and, following Completion, the Enlarged Group.

It is likely that the data protection regulatory standards in the EU will continue to increase following Completion. Regulatory guidance, case law and enforcement activity are increasing and significant further changes are likely to occur that will further enhance the data protection rights of individuals and have commensurate impact upon the ability of the 888 Group, the Target Business and, following Completion, the Enlarged Group to process personal data in a manner that maximises its commercial value. For example, the EU has proposed a new regulation on ePrivacy that could further impact the use of cookies and similar technologies. Many jurisdictions outside of the EU have also introduced, or are in the course of introducing, more robust data protection laws, in many cases following the principles set out in GDPR. Such laws may impact the ability of the 888 Group, the Target Business and, following Completion, the Enlarged Group to effectively expand into these jurisdictions by limiting processing activities, reducing the ability of the 888 Group, the Target Business and, following Completion, the Enlarged Group to market to new customers and/or increasing operational and compliance costs, each of which are central to the ability of the 888 Group, the Target Business and, following Completion, the Enlarged Group respectively to expand into such jurisdictions effectively.

The introduction of further data protection laws in jurisdictions in which the 888 Group, the Target Business and, following Completion, the Enlarged Group operate may also limit the ability of the 888 Group, the Target Business and, following Completion, the Enlarged Group respectively to effectively market and cross-sell to its existing customers through constraining processing activities and/or increasing operational and compliance costs.

The success of the 888 Group, the Target Business and, following Completion, the Enlarged Group will depend on the effectiveness of its marketing and promotional activities to expand its customer base and enter new markets and maintain, develop and enhance its brands.

Customer acquisition and retention, and therefore the business, results of operations, financial condition and prospects of the 888 Group, the Target Business and, following Completion, the Enlarged Group, will depend significantly upon the effectiveness of its marketing and promotional activities. This includes the granting of promotional bonuses, loyalty points, guaranteeing attractive prize-pools and other forms of promotional activities. There are however limitations to, and in some cases, prohibitions on the online and offline marketing channels, as well as permitted forms of promotional activity, available to the 888 Group, the Target Business and, following Completion, the Enlarged Group as a result of applicable law and regulation.

In markets where the 888 Group and the Target Business currently generate revenue and, following Completion, where the Enlarged Group will generate revenue, the 888 Group, the Target Business expand and, following Completion, the Enlarged Group will expand, its customer base by improving its product offering to customers, developing penetration in existing markets, and seeking new licences where available and commercially viable. In new jurisdictions, successful marketing will involve local adaptations to the overall marketing strategy of the 888 Group, the Target Business and, following Completion, the Enlarged Group as a result of social, political and legal differences among jurisdictions. The 888 Group, the Target Business and, following Completion, the Enlarged Group will incur costs when expanding into new geographic markets. While the 888 Group and the Target Business have been successful in entering new geographic markets to date, future entry into new geographic markets by the 888 Group, the Target Business and, following Completion, the Enlarged Group may not be successful. In particular, the marketing strategy of the 888 Group, the Target Business and, following Completion, the Enlarged Group in new geographic markets may not be well received by target customers or such marketing strategy may not otherwise be socially acceptable in that jurisdiction. The 888 Group, the Target Business and, following Completion, the Enlarged Group may be unable to successfully deal with new and different local operating environments and may be subject to unfamiliar restrictive local laws and regulations which may include specific technological requirements that are incompatible with its technology or business model, local ownership requirements or exchange control regulations which limit available payment methods for foreign operators. The 888 Group, the Target Business and, following Completion, the Enlarged Group may also face local state monopolies or other local vested interests that oppose the entry of new operators or already have substantial local market share. Furthermore, in entering new markets and consolidating the 888 Group's, the Target Business' and, following Completion, the Enlarged Group's position in existing markets, the 888 Group, the Target Business and, following Completion, the Enlarged Group respectively will face challenges in terms of effectively cross-marketing across the 888 Group's, the Target Business; and, following Completion, the Enlarged Group's product portfolio and minimising the risk of cannibalisation. All of these could have a material adverse effect on the business, results of operations, financial condition and prospects of the 888 Group, the Target Business and, following Completion, the Enlarged Group.

The success of the 888 Group, the Target Business and, following Completion, the Enlarged Group will also depend on the maintenance, development and enhancement of its brand. If the 888 Group, the Target Business and, following Completion, the Enlarged Group is unable to maintain, develop and enhance its brands, its ability to implement its strategic goals may be adversely affected. Each of the 888 Group and the Target Business use, and, following Completion, the Enlarged Group will use, affiliate marketing that is expected to generate a significant portion of their revenues. If the 888 Group's, the Target Business' and, following Completion, the Enlarged Group's affiliates suffer damage to their reputation, or become subject to onerous regulatory or legislative requirements, this could adversely affect the brands of the 888 Group, the Target Business and, following Completion, the Enlarged Group respectively. In addition, some of the participants in the 888 Group's, the Target Business' and, following Completion, the Enlarged Group's affiliate marketing network may choose to compete with the 888 Group, the Target Business and, following Completion, the Enlarged Group respectively by also marketing their own brands or brands of competitors. These participants may decide in the future to shift their activities towards competitors of the 888 Group, the Target Business and, following Completion, the Enlarged Group or terminate their agreements. If such affiliate marketers decide to market their own or a competitor's services, revenues of the 888 Group, the Target Business and, following Completion, the Enlarged Group may decline. Increased competition may require more management time and resources and greater levels of expenditure on marketing activities and to maintain, develop and enhance the brands of the 888 Group, the Target Business and, following Completion, the Enlarged Group. In the 888 Group's, the Target Business' and, following Completion, the Enlarged Group's B2B division, the 888 Group, the Target Business and, following Completion, the Enlarged Group respectively may also be dependent on the success of its B2B partners' marketing activities, brand development and enhancement efforts.

The Proposed Acquisition will result in the Enlarged Group operating a greater number of competing brands. The Enlarged Group will be required to successfully co-ordinate the marketing and promotional activities of various competing brands without impacting on the commercial effectiveness and success of each brand. The Enlarged Group will need to maintain the distinctiveness of the various brands under common ownership in order to prevent cannibalisation of its customers.

The Enlarged Group may therefore be subject to restrictions resulting in a loss of marketing channels. It may be unable to expand its customer base in those markets from which the 888 Group and the Target Business currently generate revenue or fail to successfully enter new geographic markets. The Enlarged Group may also fail to maintain, develop and enhance its brands or successfully co-ordinate the marketing of competing brands. The participants of its affiliate marketing network or its B2B partners may also choose to compete with the Enlarged Group. The occurrence of any of these events could have a material adverse effect on the business, results of operations, financial condition and prospects of the Enlarged Group.

The 888 Group and the Target Business depend on and, following Completion, the Enlarged Group will depend on, a number of third parties for the operation of its business.

The 888 Group and the Target Business have key contractual relationships with a number of third parties including suppliers, insurers, partners, banks, licensors, internet and other technology-based service providers (including providers of geolocation and identity verification systems) and payment processors. The 888 Group and the Target Business rely on, and following Completion, the Enlarged Group will rely on, key suppliers in order to carry on their operations. In particular, the 888 Group, and the Target Business depend on and, following Completion, the Enlarged Group will depend on, banking and payment processing for the success of its business. The provision of convenient, trusted, fast and effective payment processing services to customers and potential customers of the 888 Group, the Target Business and, following Completion, the Enlarged Group is critical to its business. If there is any deterioration in the quality of the payment processing services provided to its customers or any interruption to those services, or if such services are only available at an increased cost to the 888 Group, the Target Business and, following Completion, the Enlarged Group or its customers, or if such services are withdrawn or terminated and no timely and comparable replacement services are found, customers and potential customers of the 888 Group, the Target Business and, following Completion, the Enlarged Group respectively may be deterred from using its products. The failure of one or more of these third parties or the failure of any of them to fulfil its obligations to the 888 Group, the Target Business and, following Completion, the Enlarged Group may cause significant disruptions to the operations of the business and have a material adverse effect on the business, results of operations, financial condition and prospects of the 888 Group, the Target Business and, following Completion, the Enlarged Group.

The 888 Group relies and, following Completion, the Enlarged Group will rely, on geolocation and identity verification systems to ensure compliance with laws and regulations and to prevent those who are not permitted to access the 888 Group's and, following Completion, the Enlarged Group's online products, to process deposits and withdrawals made by its customers and providing information regarding schedules, results, performance and outcomes of sporting events to determine when and how bets are settled. The software, systems and services provided by such third-party providers may not meet expectations, contain errors or weaknesses, be compromised or experience outages all of which could have a material adverse effect on the business, results of operations, financial condition and prospects of the 888 Group and, following Completion, the Enlarged Group by preventing customers who are permitted to access its online platform from so accessing it, delaying payment or resulting in errors in settling bets, which could give rise to regulatory issues and reputational damage.

In addition, the 888 Group depends and, following Completion, the Enlarged Group will depend, on the interoperability of its technology with popular mobile operating systems and the availability of its mobile applications for download via third-party platforms. The 888 Group does not, and following Completion, the Enlarged Group will not, have formal or informal relationships with parties that control design of mobile devices and operating systems and there is no guarantee that popular mobile devices will start or continue to support or feature its product offerings. If any of the third-party platforms used to distribute products were to limit or disable the availability of mobile applications or advertising on their platforms, the 888 Group's, and following Completion, the Enlarged Group's, ability to generate revenue could be harmed which could have a material adverse effect on the business, results of operations, financial condition and prospects of the 888 Group and, following Completion, the Enlarged Group.

The 888 Group also relies, and following Completion, the Enlarged Group will rely on products, technology and intellectual property licensed from third parties that it uses, and expects to continue to use, in its B2B and B2C offerings. The success of the business of the 888 Group and following Completion, the Enlarged Group, may depend, in part, on its ability to obtain, retain and/or expand licences for popular technologies and games in a competitive market. There can be no assurance that third-party licences or support for licensed products that may be necessary or desirable for the 888 Group and following Completion, the Enlarged Group, to carry on its business and offer its products to customers will be available to the 888 Group and, following Completion, the Enlarged Group on commercially reasonable terms, if at all. If the 888 Group and, following Completion, the Enlarged Group is unable to renew and/or expand existing licences or obtain new licences, including as a result of reluctance of third parties to subject themselves to regulatory review that may be required to operate as a supplier of the 888 Group and/or, following Completion, the Enlarged Group, it may be required to discontinue or limit our use of the products that include or incorporate licensed intellectual property, which could have a material adverse effect on the business, results of operations, financial condition and prospects of the 888 Group and, following Completion, the Enlarged Group.

The success of the poker business of the 888 Group, the Target Business and, following Completion, the Enlarged Group is dependent on maintaining a certain level of customer liquidity.

The success of the poker business of the 888 Group and the Target Business is dependent on and, following Completion, the Enlarged Group will be dependent on, maintaining a certain level of customer liquidity, since customer liquidity increases the number of opposing customers available, the size of the winnings pot and other factors. The increased liquidity offered by the Enlarged Group is expected to further strengthen the 888 Group's position in the online poker market.

Regulations in many jurisdictions provide that customers within these jurisdictions may only play against other customers located in the relevant jurisdiction (so-called ring-fenced markets) or other customers located in certain other specified jurisdictions (so called semi-ring-fenced markets). These ring-fenced markets include Italy and these semi-ring-fenced markets include Spain (in which liquidity is shared with France and Portugal) and New Jersey, Nevada and Delaware (which share liquidity between themselves). As a result, online betting and gaming operators now need to be able to establish sufficient poker liquidity in countries with such regulations, in addition to establishing a large international market for other countries. Should additional countries with large market potential for the 888 Group, the Target Business and, following Completion, the Enlarged Group seek to ring-fence their customer liquidity in a similar manner, the failure to establish sufficient customer liquidity in these countries could have a material adverse effect on the business, results of operations, financial condition and prospects of the 888 Group, the Target Business and, following Completion, the Enlarged Group respectively.

The revenue of the 888 Group, the Target Business and, following Completion, the Enlarged Group may fluctuate as a result of individual events or betting outcomes.

A significant proportion of the 888 Group's and the Target Business' revenue are derived from and, following Completion, the Enlarged Group's revenue will be derived from fixed-odds betting which means winnings are paid on the basis of the stake placed and the odds quoted before the conclusion of the event (rather than, for example, being determined after the event from a pool of stake money from which the operator's revenue is deducted). While the odds offered to customers are intended to provide a target average return (or gross win percentage) to the bookmaker over a large number of events, this outcome is not guaranteed, particularly over a smaller number of events. From time to time, the 888 Group, the Target Business and, following Completion, the Enlarged Group could experience significant losses caused by unfavourable outcomes in individual events.

The 888 Group, the Target Business and, following Completion, the Enlarged Group may experience returns below expected gross win percentage owing to, among other things:

· a series of outcomes skewed towards its customers betting selections in those events, particularly over shorter time periods (such as when a disproportionate number of "favourites" win or a "national" team or sports person from a major market wins); or

· failures of the people, processes and/or systems which the 888 Group and the Target Business have in place and, following Completion, the Enlarged Group will have in place to manage its bookmaking risk, for example, by inadvertently inverting lines between teams such that the odds are significantly different from the true odds intended to be offered to customers, failing to apply appropriate limits or adjust odds.

In online casino and betting, operator losses are limited per stake to a maximum pay-out. When looking at bets across a period of time, operator losses can potentially be larger in the short term. Given the high volume of the business and that statistical gross win margin embedded within all casino games, major operator losses are infrequent over long periods, however, the 888 Group's, the Target Business' and, following Completion, the Enlarged Group's earnings in any particular financial period may also fluctuate based on whether it pays out any jackpots to its customers during that period.

The 888 Group and the Target Business are exposed to and, following Completion, the Enlarged Group will be exposed to, changes in technology and may not be able to keep up-to-date with developments and launch new products or new technologies in a timely manner or at all and such products or technologies may not be successful.

The 888 Group's and the Target Business' success to date has, to an extent, been driven by their ability to consistently develop and launch new customer products and new and innovative technologies. There can be no certainty that the 888 Group, the Target Business and, following Completion, the Enlarged Group will continue to be able to develop its technology to keep up-to-date with developments across the betting and gaming sector and, in particular, to launch such products or new technologies in a timely manner or at all. In addition, there can be no certainty that such products will be popular with customers or that such products or new technologies will be reliable, robust and not susceptible to viruses or failure. In certain jurisdictions, such new or updated products or technologies may require regulatory and licensing approvals that may be delayed or not provided, which would restrict the use of such products or technologies. If the 888 Group, the Target Business and, following Completion, the Enlarged Group fails to keep up-to-date with developments and launch new products or technologies in a timely manner, or at all, it may lose its market share to competitors or fail to gain market share in new jurisdictions. Any of these factors could have a material adverse effect on the business, results of operations, financial condition and prospects of the 888 Group, the Target Business and, following Completion, the Enlarged Group.

The 888 Group, the Target Business and, following Completion, the Enlarged Group may be unsuccessful if it undertakes future acquisitions, joint ventures or alliances, and may be unsuccessful in the integration of businesses recently acquired.

The 888 Group, the Target Business and, following Completion, the Enlarged Group may seek to acquire or invest in other businesses if appropriate opportunities become available. Any future acquisition may pose regulatory, antitrust, integration and other risks. Any of these factors may significantly affect the benefits or anticipated benefits of such acquisitions or investments and consequently the results or operations of the 888 Group, the Target Business and, following Completion, the Enlarged Group. Furthermore, any new acquisitions will require significant management time and resources and may require the diversion of resources from other activities.

The 888 Group has made a number of acquisitions in recent years, including the acquisition of a portfolio of bingo brands, including Costa Bingo, in February 2019 and the acquisition of the BetBright Sport business in March 2019 and also agreed the terms of the Proposed Acquisition in September 2021. In March 2022, the 888 Group also announced a strategic investment to launch the 888 brand across selected regulated markets in Africa. The 888 Group, the Target Business and, following Completion, the Enlarged Group may be unable to manage recent or future acquisitions profitably or to integrate such acquisitions successfully without incurring substantial costs, delays or other problems. For example, the 888 Group and, following Completion, the Enlarged Group may encounter such issues as a consequence of the Proposed Acquisition, including arising from the separation of William Hill US from the Target Group prior to Completion. For further details, see the risk factors in this section titled "The Enlarged Group could suffer unforeseen liabilities, disputes and operational difficulties arising from the separation of William Hill US from the Target Group prior to Completion and the transitional arrangements to be put in place with effect from Completion, which may adversely affect the Enlarged Group's business, financial condition, results of operations and prospects" and "The Enlarged Group's success will be dependent upon its ability to integrate the business of the 888 Group and the Target Business and it may not realise the anticipated benefits of the Proposed Acquisition".

In addition, any companies or businesses acquired or invested in may not achieve levels of profitability or revenue that justify the original investment made by the 888 Group, the Target Business and, following Completion, the Enlarged Group. The occurrence of any such events could have a material adverse effect on the business, results of operations, financial condition and prospects of the 888 Group, the Target Business and, following Completion, the Enlarged Group.

The 888 Group, the Target Business and, following Completion, the Enlarged Group may face difficulties in protecting its intellectual property.

The 888 Group's policy is to register only its key trade marks in select jurisdictions, in large part due to the nature of the trade marks, many of which are game names, which are subject to frequent changes and updates. Registration of trade marks is generally more extensive in Europe given the geographical focus of the 888 Group and the sophistication of the intellectual property regime in the region. In the US, the 888 Group is in the process of registering its key trade marks. Trade mark registration in South America and in Asia is less extensive and the laws of various foreign countries in which the Enlarged Group plan to compete may not protect its intellectual property to the same extent as do the laws in Europe or the US. The Target Business has registered its key trade marks in select jurisdictions, with broad coverage in European jurisdictions, North, South, and Central America, and Asia Pacific. The failure or inability of the 888 Group, the Target Business and, following Completion, the Enlarged Group to adequately protect its intellectual property rights, including its rights in trade marks, domain names, know-how or trade secrets could impair the 888 Group's, the Target Business' and, following Completion, the Enlarged Group's ability to be commercially competitive and have a material adverse effect on its business, results of operations, financial condition and prospects.

The 888 Group, the Target Business and, following Completion, the Enlarged Group may face claims alleging infringement of intellectual property rights held by others.

The business activities, products and systems of the 888 Group, the Target Business and, following Completion, the Enlarged Group may infringe the proprietary rights of others, and other parties may assert infringement claims against any of them. Parties making claims against the 888 Group, the Target Business and, following Completion, the Enlarged Group may be able to obtain injunctive or other equitable relief which could effectively block the ability of the 888 Group, the Target Business and, following Completion, the Enlarged Group respectively to utilise those rights. Any such claim and any resulting litigation, should it occur and succeed, could subject the 888 Group, the Target Business and, following Completion, the Enlarged Group to significant liability for damages (or an account of profits) and legal costs (which would be incurred regardless of whether the claim is successful or not) and could result in invalidation of their proprietary rights, loss of rights to use software or other intellectual property or technology that are material to its business and/or require it to enter into costly and onerous royalty and licensing agreements. Such royalty and licensing agreements, if required, may not be available on terms acceptable to the 888 Group, the Target Business and, following Completion, the Enlarged Group, or may not be available at all. In addition, the 888 Group, the Target Business and, following Completion, the Enlarged Group may also need to file legal proceedings to defend its trade secrets and the validity of its intellectual property rights, or to determine the validity and scope of the proprietary rights of others. Such litigation, whether successful or unsuccessful, could result in substantial costs and diversion of resources, including management time and resources, as well as potential negative publicity. The occurrence of any of these events could have a material adverse effect on the business, results of operations, financial condition and prospects of the 888 Group, the Target Business and, following Completion, the Enlarged Group.

The 888 Group, the Target Business and, following Completion, the Enlarged Group may fail to maintain effective and compliant anti-money laundering, counter-terrorist financing and anti-corruption policies and procedures.

The 888 Group and the Target Business currently receive deposits and other payments from customers in the normal course of their business. The receipt of monies from customers imposes anti-money laundering, counter terrorist financing and other obligations and potential liabilities on the 888 Group and the Target Business and, following Completion, will impose such obligations and potential liabilities on the Enlarged Group. Certain of the 888 Group's, the Target Business' and, following Completion, the Enlarged Group's customers may seek to launder money through its business or use stolen funds to access betting or gaming services. Whilst the 888 Group and the Target Business have, and following Completion, the Enlarged Group will have, processes in place regarding customer profiling and identification of customers' source of funds, such processes may fail or prove to be inadequate. If the 888 Group, the Target Business and, following Completion, the Enlarged Group is unsuccessful in detecting money laundering or terrorist financing activities it could suffer loss directly, be subject to civil or criminal sanctions and/or lose the confidence of its customers, which could have a material adverse effect on the 888 Group's, the Target Business' and, following Completion, the Enlarged Group's reputation, brand, commercial relationships, ability to attract and retain employees and customers, qualification to have its securities listed on a stock exchange and, more generally, operations, financial performance and prospects. The 888 Group, the Target Business and, following Completion, the Enlarged Group could also be subject to regulatory enforcement leading to fines or other sanctions which could also have a material adverse effect on the 888 Group, the Target Business and, following Completion, the Enlarged Group. In addition, it is difficult for the 888 Group or the Target Business, and following Completion it will be difficult for the Enlarged Group, to estimate the time or resources that will be needed for the investigation and final resolution of any regulatory enforcement proceedings relating to money laundering, terrorist financing or related activities because, in part, the time and resources needed depend on the nature and extent of the information requested by the authorities involved, and such time or resources could be substantial.

In addition, there is a risk that increased regulatory measures regarding anti-money laundering and counter-terrorist financing may require the 888 Group, the Target Business and, following Completion, the Enlarged Group to expend significant capital or other resources and/or may require certain businesses within the 888 Group, the Target Business and, following Completion, the Enlarged Group to modify internal standards, procedures or their product offering or operations. The tightening of anti-money laundering or counter-terrorist financing laws and regulations may also affect the speed and convenience with which customers can access the 888 Group's, the Target Business' and, following Completion, the Enlarged Group's products and services, which may also have a material adverse effect on the 888 Group, the Target Business and, following Completion, the Enlarged Group's ability to generate revenue.

The 888 Group and the Target Business is required and, following Completion, the Enlarged Group will be required, to comply with all applicable international trade, export and import laws and regulations and will be subject to export controls and economic sanctions laws and embargoes imposed by the governments of the jurisdictions in which it operates and which may otherwise apply to its activities. Changes in economic sanctions laws may restrict the 888 Group's, the Target Business' and, following Completion, the Enlarged Group's business practices, including potentially requiring the cessation of business activities in sanctioned countries or with sanctioned entities or persons, and may result in the 888 Group, the Target Business and, following Completion, the Enlarged Group respectively modifying its compliance programmes. The 888 Group and the Target Business is and, following Completion, the Enlarged Group will also be subject to, the UK Bribery Act, the FCPA and other anti-bribery laws that generally prohibit the offering, promising, giving, agreeing to give, or authorising other to give anything of value, either directly or indirectly, to a government official in order to influence official action, or otherwise obtain or retain a business advantage. The business of the 888 Group and the Target Business is heavily regulated and therefore involves and, following Completion, the Enlarged Group's business will be heavily regulated and will therefore involve, significant direct and indirect interaction with public officials of various governments worldwide. The 888 Group and the Target Business have implemented, and the Enlarged Group will maintain, safeguards and policies to deter practices by its directors, officers, employees, agents, collaborators and contractors that would violate applicable laws or regulations and to reduce risks that its activities could breach applicable laws, including economic sanctions laws. However, the 888 Group, the Target Business and, following Completion, the Enlarged Group cannot ensure that its compliance controls, policies and procedures will in every instance protect it from acts committed by such persons that would violate the laws or regulations of the jurisdictions in which it will operate or which might otherwise apply to its activities. If the 888 Group, the Target Business and, following Completion, the Enlarged Group is unsuccessful in detecting such acts it could suffer loss directly, be subject to civil or criminal sanctions and/or lose the confidence of its customers. Furthermore, the 888 Group, the Target Business and, following Completion, the Enlarged Group could also be subject to regulatory enforcement leading to fines or other sanctions, such as disgorgement of profits, cessation of business activities, implementation of new or enhances compliance programmes, requirements to obtain additional licences and permits, prohibitions on the conduct of its business and/or restrictions on its ability to market and sell products or provide services in one or more jurisdiction, all of which could have a material adverse effect on the 888 Group, the Target Business and, following Completion, the Enlarged Group respectively.

The 888 Group and the Target Business have each adopted various policies and procedures to comply with their respective anti-money laundering, sanctions, counter-terrorist financing and anti-corruption obligations. These policies and procedures are not identical and reflect assessments made by each of the 888 Group and the Target Business in relation to their relevant obligations. Following Completion, the Enlarged Group will be required to align its view on such policies and procedures and it is possible that this process could result on certain activities which have previously been carried out by the 888 Group or the Target Business no longer being permitted under the Enlarged Group's aligned policies and procedures. If this was to occur, it could result in changes to the products and/or services offered by certain aspects of the business if the Enlarged Group and the closure of certain customer accounts, each of which could have an adverse impact on the Enlarged Group's revenues.

The 888 Group, the Target Business and, following Completion, the Enlarged Group may not be able to retain its senior management or directors, or attract, retain or motivate highly skilled employees. 

The success of the 888 Group, the Target Business and, following Completion, the Enlarged Group will in part be dependent on the continued services and performance of the Directors and senior management. The Enlarged Group will also depend in part on its ability to continue to attract, retain and motivate highly skilled employees, in particular, with respect to personnel critical to the operation of William Hill Retail given that the 888 Group currently only provides an online-only offering to its customers.

The 888 Group and the Target Business are large organisations, each with its own unique organisational culture and approach to its business, staff, customers and other stakeholders, which have developed organically over many years. Successful integration of the Target Business with the 888 Group will depend on the ability of the 888 Group's management to bring together the cultures and capabilities of both organisations in an effective manner, which will require the cooperation of the Target Business' existing workforce. A failure to successfully integrate the organisational cultures of the 888 Group and the Target Business within the Enlarged Group could materially adversely affect the prospects of the Enlarged Group.

In addition, although there are highly skilled and qualified workforces in the regions where the 888 Group and the Target Business are currently located, competition for software professionals, engineers, sales and marketing and other personnel critical to the business of the 888 Group, the Target Business and, following Completion, the Enlarged Group is intense. In some geographically small but important jurisdictions, such as Gibraltar, where a proportion of the 888 Group's and Target Business' infrastructure to run its betting and gaming operations is based and, following Completion, where a proportion of the Enlarged Group's infrastructure will be based, there may only be a limited number of persons with the requisite skills and it may become increasingly difficult to hire such persons. Further, the exit of the United Kingdom from the European Union may cause disruption to the movements of employees from Spain to the Enlarged Group's operations in Gibraltar, making it more difficult to attract and retain employees.

If the 888 Group, the Target Business and, following Completion, the Enlarged Group is unable to retain its current senior management and Directors, or attract and retain sufficiently qualified staff, it may be unable to achieve or sustain its anticipated growth or to execute its strategic objectives, which could have a material adverse effect on the business, results of operations, financial condition and prospects of the 888 Group, the Target Business and, following Completion, the Enlarged Group.

The 888 Group has recorded, and following Completion the Enlarged Group will record, a significant amount of goodwill and the Enlarged Group may never realise the full value thereof.

The 888 Group has recorded a significant amount of goodwill and other intangible assets relating to its acquisitions, the development of gaming platforms and software, and the internal costs incurred in respect of the new data centre project in Dublin. This amount of goodwill will carry over to the balance sheet of the Enlarged Group and will increase in connection with acquisitions it completes in the future, including in connection with the Proposed Acquisition. The 888 Group tests, and following Completion, the Enlarged Group will test, its goodwill and other intangible assets in accordance with authoritative accounting guidance on an annual basis and/or upon the occurrence of a triggering event. In FY 2021, the 888 Group had goodwill relating to AAPN of USD 30.9 million (2020: USD 30.9 million) and intangible assets of USD 5.6 million (2020: USD 7.0 million) arising from the acquisition in December 2018. In FY 2021, the 888 Group also had goodwill relating to Bingo B2C of USD 50.0 million (2020: USD 50.0 million; 2019: USD 104.4 million) and Bingo B2B of USD 0.0 million (2020: USD 0.0 million; 2019: USD 24.9 million). During 2020, an impairment charge of USD 54.4 million was recorded in respect of Bingo B2C and USD 24.9 million in respect of Bingo B2B. The Bingo cash-generating unit's goodwill primarily arose from the acquisitions Globalcom in 2007, Wink in 2009 and Jet in 2019. In FY 2021, the carrying value of the Bingo cash-generating units also included intangible assets of USD 10.9 million (2020: USD 15.3 million; 2019: USD 19.5 million), the majority of which related to the value associated with the Jet customer list. In Target FY 2021, the Target Group had goodwill of GBP 1,320.5 million (Target FY 2020: GBP 353.6 million; Target FY 2019: GBP 344.2 million), which related to the Target Business' William Hill Online and corporate segments. There is a risk that these assets are not supported by either the future cash flows they are expected to generate or their fair value, resulting in an impairment charge that has not been recognised by management.

Such charges may result in material reductions in the 888 Group's or, following Completion, the Enlarged Group's reported income and equity.

The 888 Group's, the Target Business' and, following Completion, the Enlarged Group's insurance coverage may not be adequate to cover all possible losses that they could suffer, their insurance costs may increase and they may not be able to obtain a sufficient level of insurance coverage in the future.

The 888 Group has and, following Completion, the Enlarged Group will have in place insurance policies that the Company believes are customary in their breadth and scope and offer sufficient protection to the 888 Group and will, following Completion, offer sufficient protection to the Enlarged Group. Notwithstanding the insurance policies that the 888 Group maintains and, following Completion, the Enlarged Group will maintain, the insurance coverage may not be sufficient to completely mitigate losses that it may suffer, including losses relating to the Enlarged Group's retail estate.

Market forces beyond the 888 Group's and the Enlarged Group's control may limit the scope of the insurance coverage it can obtain in the future or its ability to obtain coverage at reasonable rates. Certain catastrophic losses may be uninsurable or too expensive to justify obtaining insurance. As a result, if the 888 Group suffers or, following Completion, the Enlarged Group suffers such a catastrophic loss, it may not be successful in obtaining future insurance without increases in cost or decreases in coverage levels which could have a material adverse effect on the business, results of operations, financial condition and prospects of the 888 Group and, following Completion, the Enlarged Group.

Work stoppages and other labour problems could negatively impact the operations of the 888 Group and, following Completion, the Enlarged Group.

The 888 Group's employees in Israel benefit from statutory and industry-wide collective bargaining arrangements. While no other employees within the 888 Group are members of a labour or trade union or benefit from collective bargaining arrangements, from time to time, the 888 Group has experienced and may in the future experience and, following Completion, the Enlarged Group may in the future experience, attempts by labour organisations to organise certain of its employees. There can be no assurance that the 888 Group and, following Completion, the Enlarged Group will not experience additional and successful union or collective bargaining activity in the future. The impact of any such activity is undetermined and could have a material adverse effect on the business, results of operations, financial condition and prospects of the 888 Group and, following Completion, the Enlarged Group.

The 888 Group, the Target Business and, following Completion, the Enlarged Group may be exposed to the risk of customer chargebacks.

Chargebacks occur when customers, card issuers or payment processors seek to void card or other payment transactions. Chargebacks are a cost of most retail-based businesses and do not relate only to online betting and gaming. Cardholders are supposedly able to reverse card transactions only if there has been unauthorised use of the card or the services contracted for have not been provided. Customers occasionally seek to reverse their real money losses through chargebacks. In FY 2021, the 888 Group incurred chargeback costs amounting to USD 3.5 million and in Target FY 2021 the Target Business incurred chargeback costs amounting to GBP [ ˜ ] million. The 888 Group and the Target Business place, and following Completion, the Enlarged Group will place emphasis on control procedures to protect from chargebacks, including tracking customers that have previously charged back and by providing their customers with a variety of alternative payment processing methods such as e-wallets and pre-paid cards to reduce the risk of chargebacks. The Company expects that a proportion of customers will continue to reverse payments made by card and other payment methods through the use of chargebacks, and if this is not controlled, it could have a material adverse effect on the business, results of operations, financial condition and prospects of the 888 Group, the Target Business and, following Completion, the Enlarged Group.

RISKS RELATING TO THE PROPOSED ACQUISITION

Completion is subject to a number of conditions which may not be satisfied or waived or which could only be satisfied on terms which may not be acceptable to 888 or the Seller and the Enlarged Group may be subject to post-Completion undertakings.

Under the Sale and Purchase Agreement, Completion of the Proposed Acquisition remains subject to the satisfaction (or waiver, if applicable) of certain conditions:

· the approval of the Acquisition Resolution by 888 Shareholders at the General Meeting ("Shareholder Approval");

· the approval by the FCA of Readmission and the publication of a duly approved prospectus in connection therewith (the "Readmission Condition"); and

· the completion of the Reorganisation, which is to be implemented by the Seller in accordance with a reorganisation steps plan agreed between 888 Bidco and the Seller (subject to certain permitted amendments).

In some jurisdictions, notifications are voluntary and 888 and Caesars may decide not to notify, bearing the risk that the authorities may later open an investigation on their own initiative. Authorities in such jurisdictions may request that a notification be filed and may require the Enlarged Group to give certain undertakings such as disposing parts of its business, to satisfy competition concerns. If this were to happen, it could have a material adverse effect on the business, results of operations, financial condition and prospects of the Enlarged Group.

As described in the risk factor in this section titled "The Enlarged Group could face the risk of loss, revocation, non-renewal or change in the terms of its gaming licences", the Proposed Acquisition and the resulting change of control of the Target Group, will require notifications to, and/or regulatory approvals from, the relevant regulatory authorities either prior to or following Completion. If the approvals are delayed, this could have a material adverse effect on the Enlarged Group's business, results of operations, financial condition and prospects.

In the event that the conditions to Completion of the Proposed Acquisition are not satisfied or waived on or before the Long Stop Date, being 5.00 p.m. on 30 June 2022 or such other date agreed between the 888 Bidco and the Seller, the Proposed Acquisition will not proceed, the debt facilities under the Senior Facilities Agreement that will be entered into to finance the Proposed Acquisition and pay related costs will cease to be available to the 888 Group.

A third party may be able to obtain a large enough shareholding in 888 to delay or prevent Completion.

888 is a listed company whose ordinary shares are freely traded on the London Stock Exchange. Notwithstanding the irrevocable undertakings received from certain 888 Shareholders to vote in favour of the Proposed Acquisition at the General Meeting, it is possible that an existing or new shareholder with a significant shareholding in 888 could use, or could threaten to use, its shareholding to vote against the Proposed Acquisition at the General Meeting. Such an action could materially delay or prevent the implementation of the Proposed Acquisition and therefore deprive the parties of some or all of the anticipated benefits of the Proposed Acquisition.

A compensation amount may be payable by 888 Bidco to Caesars if the Proposed Acquisition is terminated in certain circumstances.

888 Bidco is obliged to pay a compensation amount of GBP 14.97 million to the Seller in certain circumstances, including if: (i) the Board withdraws the Recommendation at any time prior to the General Meeting and Shareholder Approval is not obtained; (ii) the General Meeting is not convened by the Company as soon as reasonably practicable following publication of the Shareholder Circular or 888 adjourns the General Meeting other than in accordance with the provisions of the Sale and Purchase Agreement; or (iii) the Sale and Purchase Agreement is terminated due to the Acquisition Resolution not being passed at the General Meeting and/or the Readmission Condition not being satisfied or waived by the Long Stop Date or becoming incapable of satisfaction before such date.

The Enlarged Group could suffer unforeseen liabilities, disputes and operational difficulties arising from the separation of William Hill US from the Target Group prior to Completion and the transitional arrangements to be put in place with effect from Completion, which may adversely affect the Enlarged Group's business, financial condition, results of operations and prospects.

Prior to Completion, Caesars will complete an intra-group reorganisation in order to separate William Hill US from the Target Group (the "Reorganisation"). Although Caesars has sought to structure the Reorganisation in a tax efficient manner, tax costs may have to be borne by the Enlarged Group in respect of steps required to implement the Reorganisation that are not envisaged as at the date of this announcement. Following Completion, the Enlarged Group could also face liabilities in respect of its period of ownership of William Hill US for which it does not have recourse under the Sale and Purchase Agreement, Warranty Deed, Tax Deed or otherwise.

It is expected that a proportion of the Target Group employees will transfer to Caesars prior to Completion, including certain skilled employees with who are currently within the technology and trading function of the William Hill Group. It is intended that the Target Group will recruit skilled employees to compensate for this and a retention incentive plan will be put in place to encourage other Target Group employees who carry out key functions to remain with the Target Group and, following Completion, the Enlarged Group. However, further Target Group employees who carry out key functions may voluntarily transfer to Caesars or William Hill US or otherwise resign and it may take longer than expected to recruit new employees to replace those departing. Any such difficulties employing or retaining key employees of the Target Group could result in significant operational difficulties for the Target Business and, following Completion, the Enlarged Group.

Furthermore, disputes or operational difficulties may arise between the Enlarged Group and Caesars following Completion in respect of the Reorganisation or the services to be provided by the Enlarged Group to Caesars, or by Caesars to the Enlarged Group, pursuant to the Transitional Services Agreement. The transitional period during which the Transitional Services Agreement is in force could be longer than the nine months currently anticipated, which may impact the operational flexibility of the Enlarged Group.

With effect from Completion, the Enlarged Group and Caesars will enter into a Trade Mark Licence Agreement, pursuant to which the Enlarged Group will provide Caesars an exclusive, perpetual (subject to certain termination rights), irrevocable, sub-licensable, royalty-free and fully paid-up licence to use certain trade marks and domain names in relation to the William Hill US business in the United States, the territories and possessions of the United States and all territories and countries in the Caribbean. This will prevent the Enlarged Group from using the relevant William Hill trade marks and domain names in the United States, which is a relatively high growth market for the betting and gaming industry. Further, disputes may arise between the Enlarged Group and the Caesars in respect of the scope of the restrictions imposed on the use of such intellectual property and rights under the Trade Mark Licence Agreement.

Any such liabilities, restrictions, difficulties or disputes arising in respect of the Reorganisation, the Transitional Services Agreement or the Trade Mark Licence Agreement may have a material adverse effect on the business, financial condition, results of operations and prospects of the Enlarged Group.

The Enlarged Group's success will be dependent upon its ability to integrate the business of the 888 Group and the Target Business and it may not realise the anticipated benefits of the Proposed Acquisition.

The current operations of the 888 Group and the Target Business will be integrated to form the combined operations of the Enlarged Group. To the extent that the Enlarged Group is unable to efficiently integrate the operations, realise cost reductions, retain qualified personnel or customers and avoid unforeseen costs or delays, there may be a material adverse effect on the business, results of operations, financial condition and prospects of the Enlarged Group. The integration of the 888 Group and the Target Business will be supported by a strong management team; however, no assurance can be given that the integration process will deliver all or substantially all of the expected benefits or realise such benefits in a timely manner. The initial synergy work carried out to date has highlighted the potential to generate savings for the Enlarged Group in areas where there may be duplication. There will inevitably be a cost involved in revising the current systems and structures of the Enlarged Group and the risk is that these costs could exceed current estimates, which would adversely affect anticipated integration benefits. Whilst integration planning has begun, more detailed consideration will need to be undertaken (including in respect of any impact on the fixed assets, locations of the business of the Enlarged Group and continued employment of the employees and management of the Enlarged Group).

The Proposed Acquisition involves certain specific integration risks, including:

· the unexpected loss of key personnel and customers (noting that the success and anticipated future growth of the Enlarged Group will depend in part on its ability to continue to attract, retain and motivate highly skilled employees in particular in key jurisdictions such as Gibraltar where the Enlarged Group's infrastructure to run its betting and gaming operation is based and where there may only be a limited number of persons with the requisite skills);

· difficulties in integrating the LBO portfolio of William Hill Retail (noting that the 888 Group does not currently have an LBO portfolio and the success and anticipated future growth of William Hill Retail within the Enlarged Group will depend in part on its ability to attract, retain and motivate personnel critical to the operation of William Hill Retail); 

· difficulties in integrating the financial, technological and management standards, processes, procedures and controls of the Target Business into the Enlarged Group;

· challenges in managing the increased scope, geographic diversity and complexity of the Enlarged Group's operations;

· attempts by third parties to terminate or alter their existing contracts with the 888 Group or the Target Business;

· conflicts between the interests of the 888 Group and the Target Business; and

· failure to mitigate contingent and/or assumed liabilities.

The Enlarged Group will encounter numerous integration challenges as a consequence of the Proposed Acquisition. In particular, following Completion, the Enlarged Group's management and resources may be diverted from its core business activity due to personnel being required to assist in the integration process. The integration process may lead to an increase in the level of administrative errors. A decline in the service standards of the Enlarged Group may result in increase in customer complaints or actions, which may lead to reputational damage and the loss of customers. Due to the demands of the integration process on management time, it may also cause a delay in other projects currently contemplated by the 888 Group and the Target Business.

The Company expects that, as a result of the Proposed Acquisition, the Enlarged Group will be able to realise estimated pre-tax cost synergies of at least GBP 100 million in 2025. The Board expects the phasing of these pre-tax synergies to be as follows: approximately GBP 5 million in 2022, GBP 54 million in 2023, GBP 70 million in 2024, and GBP 100 million in 2025, of which GBP 15 million will be in capex synergies in aggregate. It may however not prove possible to achieve the expected level of synergy benefits on integration of the businesses of the 888 Group and the Target Business on time, or at all, and/or the cost of delivering such benefits may exceed the expected cost. The estimates regarding the potential cost synergies resulting from the Proposed Acquisition included in this Appendix are based on the Directors' assessment of information currently available and may prove to be incorrect. The Enlarged Group may not realise the anticipated benefits of the Proposed Acquisition and may not be successful in integrating the business and operations of the 888 Group and the Target Business. A failure to deliver all, or substantially all, of the expected benefits or realise such benefits in a timely manner could have a material adverse effect on the business, results of operations, financial condition and prospects of the Enlarged Group.

If change of control provisions in the contracts of the Target Business are breached in connection with the Proposed Acquisition, these contracts could be terminated.

The Target Business has a number of ordinary course contracts that contain change of control termination provisions. The Proposed Acquisition could constitute a change of control under certain of these contracts. While Caesars has not identified any contracts that are material to the Target Business under which the Proposed Acquisition would trigger a change of control provision, other than the Existing Notes and the Existing Senior Facilities, if the Proposed Acquisition breaches the change of control clause in a material contract or in a material number of contracts and, following Completion, the Enlarged Group, and the relevant counterparty consent cannot be obtained, this could have a material adverse effect on the business, results of operations, financial condition and prospects of the Enlarged Group.

RISKS RELATING TO THE 888 SHARES

Shareholders may be subject to voting or distribution restrictions on, or be required to dispose of, their interests in the 888 Shares as a result of the regulatory requirements to which the 888 Group and, following Completion, the Enlarged Group is subject.

The licensing or regulatory authorities in the principal jurisdictions in which the 888 Group and the Target Business have, and following Completion, the Enlarged Group will have, a betting and/or gaming licence or in which the 888 Group, and following Completion, the Enlarged Group may seek a licence in the future, have broad powers to request or require reporting of various detailed information from and/or approve the qualification or suitability for licensing of, betting and gaming operators, including their directors, management and the holders (legal and beneficial) of interests in shares. In some jurisdictions, such authorities may impose such information sharing and filing requirements on a continuous and ongoing basis, including in relation to the Company, its Directors, management and the holders (legal and beneficial) of interests in the 888 Shares. These powers may be exercised by regulators as against the legal or beneficial holders of interests in 888 Shares or other securities in betting and gaming companies, as well as against the companies themselves, their directors and management. In some circumstances, the purpose of the exercise of powers by licensing or regulatory authorities may be to identify shareholders, directors and managers whose involvement with the licensed entity is considered to be unacceptable by that licensing or regulatory authority and such persons should therefore not have a direct or indirect financial interest in, or influence over, a betting and gaming operator in the jurisdiction.

The information required, the qualification or suitability requirements to be satisfied and the ongoing regulatory filings to be submitted, may be very detailed, onerous and/or intrusive and may include, for example, personal and financial information concerning the ultimate beneficial owners and/or persons influencing the control of corporate shareholders. In many cases, the terms of the licences of the 888 Group, the Target Business and following Completion, the Enlarged Group or the provisions of regulations in relevant jurisdictions require the 888 Group and, from Completion, will require the Enlarged Group, to produce such information on demand in relation to the legal and beneficial holders of interests in the 888 Group and, following Completion, the Enlarged Group respectively, either following, or in some cases prior to, such persons acquiring specified percentage (legal or beneficial) interests in the share capital of any members of the 888 Group and, following Completion, the Enlarged Group respectively. Any failure by the 888 Group and, following Completion, the Enlarged Group and its Directors, management or, as applicable, any holder (or proposed investor) of an interest in the 888 Group and, following Completion, the Enlarged Group respectively to comply with such requests could result in the relevant licensing or regulatory authority taking adverse action against the 888 Group and, following Completion, the Enlarged Group respectively in that jurisdiction, which may include suspension or revocation of the licences and/or the imposition of fines, which could have a material adverse effect on the business, results of operations, financial condition and prospects of the 888 Group and, following Completion, the Enlarged Group respectively.

Shareholders should be aware that the Company accepts no responsibility whatsoever for any loss which any such holder may suffer as a result of the sale of any interests held by them (whether directly or indirectly) in connection with the exercise by the Company of the powers referred to above.

Certain Shareholders may exercise significant influence over the Company following Readmission and/or their interests may differ from those of other Shareholders.

Following Readmission, the DS Trust will continue to exercise a significant degree of influence that is greater than other shareholders individually may exercise over all matters requiring shareholder approval, including the approval of significant corporate transactions. The interests of each of the DS Trust may not always be aligned with other Shareholders.

The Company and the DS Trust have entered into the Amended Relationship Agreement which governs certain aspects of the DS Trust's conduct in relation to the Company. Under the Amended Relationship Agreement, the DS Trust has the right to appoint a Non-executive Director for so long as it holds not less than 7.5 per cent. of the share capital of the Company. As at the date of this Appendix, the DS Trust has not exercised this right. The Amended Relationship Agreement and other measures may not however be sufficient to safeguard the interests of other shareholders in the Enlarged Group.

The value of an investment in the 888 Shares may fluctuate significantly.

The value of the 888 Shares may fluctuate significantly as a result of a large number of factors as well as period-to-period variations in operating results or change in revenue or profit estimates by the Company, industry participants or financial analysts.

The market price of the 888 Shares could be negatively affected by sales of substantial amounts of the 888 Shares in the public market or the perception or any announcement that such sales could occur. The Company cannot predict what effect, if any, this would have on the market price of the 888 Shares.

The value of the 888 Shares could also be affected by developments unrelated to the Company's operating performance, such as the operating and share price performance of other companies that investors may consider comparable to the Company, speculation about the Company in the press or the investment community, strategic actions by competitors, including acquisitions and/or restructurings, changes in market conditions and regulatory changes in any number of countries, whether or not the Company derives significant revenue therefrom, and shifts in macro-economic or geopolitical conditions generally. The occurrence of any of these events could adversely affect the market price of the 888 Shares and Shareholders may find it more difficult to sell their 888 Shares at a time and price which they deem appropriate, or at all.

Shareholders may earn a negative or no return on their investment in the Company.

The Company's results of operations and financial condition are dependent on the trading performance of the members of the 888 Group and, following Completion, the Enlarged Group. There can be no assurance that the Company will pay dividends in the future. Any decision to declare and pay dividends in the future will be made at the discretion of the Board and will depend on, among other things, applicable law, regulation, restrictions, the Company's financial position, working capital requirements, finance costs, general economic conditions and other factors the Directors deem significant from time to time. The Company's ability to pay dividends will also depend on the level of distributions, if any, received from its operating subsidiaries.

The shareholdings of holders of 888 Shares may be diluted as a result of the issue of additional 888 Shares in connection with any future acquisitions, any share incentive or share option plan or otherwise.

In connection with financing the Proposed Acquisition, on [7] April 2022, 888 raised net proceeds of GBP [ ˜ ] million pursuant to the Placing, which resulted in the issuance [ ˜ ] new 888 Shares on a non-preemptive basis. Further, the 888 Group and, following Completion, the Enlarged Group may seek to raise further financing to fund future acquisitions and other growth opportunities. The Company may, for these and other purposes, such as in connection with share incentive or share option plans, issue additional equity or convertible equity securities. Under the 888 Long Term Incentive Plan, which is open to employees (including Executive Directors) and full-time consultants of the 888 Group at the discretion of the Remuneration Committee, and the 888 Deferred Share Bonus Plan, which is available to Executive Directors. As a result, the Company's existing shareholders would suffer dilution of their percentage ownership.

A trading market for the 888 Shares may not develop.

Applications will be made to the FCA, immediately prior to Completion, for the 888 Shares to be re-admitted, for listing on the premium listing segment of the Official List and to the London Stock Exchange. It is expected that Readmission will become effective on the date of Completion and that dealings on the London Stock Exchange in the 888 Shares will commence as soon as practicable after 8.00 a.m. on that date.

There can be no assurance, however, that Readmission will become effective or that an active trading market in the 888 Shares will develop upon or following Readmission. If an active trading market is not developed or maintained, the liquidity and trading price of the 888 Shares could be adversely affected.

Shareholders may be subject to exchange rate risk.

Any dividends paid in respect of the 888 Shares will be paid in USD. Accordingly, Shareholders outside the United States are subject to adverse movements in their local currency against USD in respect of any future dividends.

Shareholders outside the United Kingdom may not be able to participate in future equity offerings.

In the case of an allotment of 888 Shares, Shareholders have certain statutory pre-emption rights (unless those rights are disapplied by a special resolution of the Shareholders at a general meeting) and such a non-pre-emptive issue could dilute the interests of Shareholders.

Securities laws of certain other jurisdictions may restrict the Company's ability to allow participation by Shareholders in such jurisdictions in any future issue of shares carried out by the Company. Each Shareholder who has a registered address in or who is resident in, or who is a citizen of, countries other than the United Kingdom should consult their professional advisers to determine whether and to what extent the 888 Shares can be used as collateral for various types of borrowing.

The City Code will not apply to the Company.

The City Code does not apply to the Company as it is registered in Gibraltar. As a result, a takeover offer for the Company will not be regulated by the Panel on Takeovers and Mergers (the "Panel"). The Articles of Association contain certain takeover protections, although these do not provide the full protections afforded by the City Code and the enforcement of such provisions is the responsibility of the Company, not the Panel.

INDUSTRY AND REGULATORY OVERVIEW

Section A: Industry Overview

Unless otherwise indicated, the information set out in this section constitutes the Company's views of the markets in which each of the 888 Group, the Target Business operates and the Enlarged Group will operate. Unless otherwise indicated, all market, industry, market share and competitive position data set out in this section and elsewhere in this Appendix that relate to the markets in which each of the 888 Group, the Target Business operates and the Enlarged Group will operate are estimates and should be treated with caution. The information has been extracted from third-party sources that the Company reasonably believes to be reliable, including the Regulus Report, but it has not independently verified such information.

All statistical and market information provided by Regulus Partners presented in this section and elsewhere in this Appendix has been reproduced from the Regulus Report. Additional factors which should be considered in assessing the usefulness of the market and competitive data are described elsewhere in this Appendix, including those set out in the section of this Appendix titled "Risk Factors". Accordingly, undue reliance should not be placed on any of the market, industry, market share and competitive position data contained in this Appendix.

Introduction

The 888 Group and William Hill are two leading European online betting and gaming business, with some of most renowned European brands.

The 888 Group has been active in the online betting and gaming industry for more than 24 years, with a strong long-term growth profile supported by its brands, proprietary online gaming technology platforms, CRM and analytical expertise. The 888 Group's core offerings are 888casino, 888sport, 888poker, and 888bingo, supported by a range of other brands.

William Hill is the most recognised name in sports betting in the UK, and enjoys strong market positions and brand awareness in the UK and many of the markets in which it operates based on revenue generated in retail and online betting and gaming. In other markets, the business operates two core brands, William Hill and Mr Green.

On Completion, the Company anticipates that the Enlarged Group will be the world's third largest listed online betting and gaming company by revenue (based on 2020 online revenue from online peers), with market leading positions in its casino, and betting product verticals, based on brand awareness. The Enlarged Group's products will be supported by proprietary online gaming and betting technology platforms, CRM and analytical expertise with significant revenue and cost synergy opportunities as the businesses are integrated.

The online betting and gaming industry

The online gaming industry emerged in the mid-1990s and has since gained momentum. Market growth has been due to a number of key growth drivers:

· Internet and technological development - The roll-out and increased penetration of high-speed internet and network infrastructures sophistication has been a key driver for growth in the sector. This, together with the proliferation of smart phones and mobile gambling and the increasing popularity of e-commerce, has allowed online operators to deliver more sophisticated and appealing games to a greater number of customers, with shorter download times and fewer connectivity disruptions. Smartphones offer the opportunity for operators to not only engage with existing customers but also more easily reach new customers.

· Growth in mobile - The strong growth in penetration of increasingly sophisticated mobile devices with increased capacity to process data and ever-improving screen quality has had a significant impact on the volume of mobile commerce generally. Mobile connectivity has also continued to improve with the evolution of ever faster networks that has further stimulated growth in mobile commerce. Many online gaming operators have sought to leverage these developments through the delivery of tailored product offerings through multiple mobile platforms and have enjoyed significant revenue growth through these channels as a result.

· Increased product development - As a consequence of technological development and the popularity of smartphones and tablets, operators have invested in product development in order to offer consumers a more varied and superior betting and gaming experience. Improved product offerings, specifically through smartphones and tablets, has been a key growth driver in the market. This has been key for the companies' customer retention, new customer acquisition and customer reactivation in a cost-effective manner.

· Social trends - Gaming and betting have become culturally more acceptable leisure activities as a result of the expansion into mobile betting and gaming. Customers who traditionally might not have gone into a bingo hall or a betting shop can now play and bet in a way that fits their lifestyle and preferences. There is also a broader acceptance of digital channels as a safe and secure means to consume gaming services.

· Increased marketing - Advertising of products by gaming operators has increased in recent years which has contributed to the growing popularity of online gaming and betting. The popularity of social media has also allowed operators to perform more targeted marketing, which has helped to drive growth in the market.

· Government adoption of heightened regulation - In response to the growth in the global online gaming market, several governments have over recent years adopted online gaming regulatory frameworks with the aim of protecting customers, promoting choice and raising taxes. Such changes provide incumbent operators with access to customers and opportunities for expansion. While such changes may increase competition in those jurisdictions, the increased product complexity combined with the increased costs of complying with heightened regulation and the imposition of gaming taxes on operators can make it more difficult for new entrants, strengthening the position of existing gaming and betting operators who have the resources to comply with heightened regulation.

The EMEA online gambling market

The EMEA online gambling market is highly dynamic. Regulus Partners estimates the total revenue in the region during 2020 was EUR 31 billion, which represents a relatively consistent compound annual growth rate of 19 per cent. since 2014. However, this broad consistency can hide material volatility and speaks to the value of an operator portfolio of licensees.

EMEA Online Gambling Market Net Revenue 2014-2026E (EUR million)

Note: The above data represents total addressable revenue market; revenue is defined as stakes less prizes and customer incentives and so is directly comparable to IFRS revenue (adding back consumer taxes such as VAT); domestically regulated and 'grey' Point of Supply markets are included, 'black markets', where online gambling is unequivocally illegal are excluded.

The key drivers of market size and growth can be identified as:

· the availability, cost, and adoption rates of enabling technology and services (broadband, smartphones, mobile data, digital payments solutions);

· the regulatory framework that applies; and

· the level of localisation required for the market to appeal to consumers and the extent to which this has been delivered.

Four broad market archetypes can be identified, although there are considerable variations within and between markets.

· Markets with high rates of enabling technology and services adoption, limited effective regulatory barriers or distortions and high levels of content homogeneity:

o for example, the UK, Sweden, Denmark, Finland, Netherlands (albeit only just regulated); and

o these markets are characterised by high levels of online gambling revenue per capita and attract a number of multi-national as well as more localised operators.

· Markets which have lower rates of enabling technology and services adoption, limited effective regulatory barriers and tend to require greater levels of product localisation:

o for example, Spain, Romania, Italy (albeit a complete advertising ban provides a level of distortion); and

o these markets are characterised by evolving channel shift from land-based gambling, which allows both local and international businesses to thrive.

· Markets with higher rates of enabling technology and services adoption, but which are constrained by specific regulatory barriers. This group is by its nature less homogeneous, for example:

o France - taxes are very high (approximately 40 per cent. revenue) and online casino is banned;

o Belgium - only land-based licensees and their single operating partners are allowed to be licensed for online gambling;

o Germany - turnover taxes on both betting (5 per cent.) and gaming (5.3 per cent.) significantly distort customer value by forcing a reduced payout vs. revenue based tax systems and the black market;

o Switzerland - only land-based casinos and their single operating partners are allowed to offer online casino (only adopted in 2019 so excluded from data below);

o Portugal - betting is taxed on turnover (8 per cent.), which significantly distorts customer value;

o Norway - the regulator actively and effectively blocks domestic advertising and payments; and

o Czech Republic - customers must prove their ID in person, significantly benefiting online licensees with a retail presence.

· Markets with low rates of enabling technology are no longer common in Europe but form a significant proportion of Middle East and Africa revenue.

Net Revenue by Country in 2019 (EUR million)

Market growth drivers

Increasing adoption of enabling technology and services can provide significant structural growth opportunities assuming limited regulatory barriers and appropriate levels of localisation. The potential for further structural growth in Europe can be illustrated by the difference in ecommerce adoption in the UK and Nordic Countries and other territories when compared to online gambling revenue per capita. The correlation within this sample of countries mentioned above is 0.58, with a clear logic for underlying causation or gambling-specific reasons for a lack of correlation (regulation, levels of localisation).

These drivers shape a clear phases of growth:

· early adopter markets tend to be gaming-led, customers are higher spending and use several accounts; substantially all European markets are in this category (as can be seen by relative revenue per capita); and

· broad engagement markets tend to be more betting-led due to the adoption of occasional sports fans, customers are more recreational and loyal to high quality service and visible brands; only the UK and Sweden are clearly currently in this category.

The level of ecommerce adoption and non-restrictive regulatory frameworks also enable channel shift. This can most clearly be seen in the economically and regulatory similar markets of UK and Denmark. The levelling off of retail betting at approximately 40 per cent. of total betting and retail gaming at approximately 55 per cent. suggests a land-based 'floor' when the drivers are passive to gambling (consumer technology) rather than active (product innovation, regulation). Since both UK and Denmark had over 80 per cent. ecommerce adoption prior to the COVID-19 pandemic they can both be considered 'digitally mature'. This is also reflected in relatively low (single digit) rates of online gambling growth compared with double digit adoption-led growth.

UK & Denmark Retail & online markets in 2019 (%)

Betting vs. Gaming in 2019 (%)

A major driver of enabling technology and services adoption has been government policy responses to the COVID-19 pandemic, in particular lockdowns. Lockdowns drove online gambling engagement globally in three inter-related ways:

· giving people the need to transact digitally for the first time, for example to order groceries or speak to loved ones over video conference;

· giving existing digital adopters more time to try new things such as online gambling, potentially also with more disposable income where government support was provided; and

· giving existing gamblers more time to spend online, particularly when land based gambling was closed or heavily restricted.

Each of these adoption and increased expenditure cohorts varied by market and each is likely to have different levels of sustainability. For example, in markets where ecommerce adoption was already very high, the boost provided by lockdowns is both relatively small and relatively transient as customers revert to previous behavioural patterns. In the UK, for example, official statistics show that:

· poker revenue doubled in Q2 2020 but then normalised to its previous rate;

· sports betting fell by approximately 40 per cent. in Q2 2020 due to cancellations mitigated by product substitution, but has now normalised to underlying rates of growth after a boost caused by a conflated sports calendar and higher than average margins; and

· slots and casino gaming added approximately 25 per cent. to underlying growth in Q2 2020 due but has also now normalised.

Similarly, official Danish and Swedish data shows little impact caused by COVID-19 policy disruptions, despite the fact that Denmark entered a full lockdown. Conversely, markets with low digital adoption have seen very considerable spikes in customer engagement caused by lockdowns, most notably official market statistics demonstrate that Portugal has grown by approximately 65 per cent. since 2019, with a 39 per cent. ecommerce adoption rate in 2019 and Italy has grown by approximately 80 per cent. since 2019, with a 38 per cent. ecommerce adoption rate in 2019.

Both of these markets have strong local offers, which might explain high rates of rapid channel shift. Conversely, the level of localisation in Spain is far less pronounced (see below) while the ecommerce adoption rate was materially higher at 58 per cent. Consequently, growth between 2019 - 2021E was only 20 per cent. in Spain. Going forward, we would expect that markets which have grown 20 per cent. or less to continue a normalised pattern, while markets which have grown 50 per cent. or more to see small levels of contraction as consumer habits adjust. However, the vast majority of revenue is likely to be maintained given that COVID-19 policy responses have simply accelerated underlying digital adoption in lagging countries and there is limited logic for customers to significantly reverse this process.

From a retail perspective, COVID-19 policy responses fall into three categories of impact:

· no revenue due to closure;

· revenue limited due to consumer restrictions caused by government policy; or

· revenue reduced by a changed consumer habits.

While the first two can have a severe short-term impact for the time that the policies are in place, only the third driver is relevant from a long-term demand perspective. Anecdotal and trading evidence so far points to a robust return of consumer expenditure outside older age cohorts who still feel at risk. This has reduced retail gambling expenditure by approximately 5-10 per cent. from pre-pandemic levels, especially for products more associated with older customers such as betting on horseracing and bingo in the UK. The extent to which this reduced engagement is structural or can be mitigated depends on large part upon corporate action to ensure that retail venues remain high quality entertainment venues.

While the rate of enabling technology and services adoption is usually visible and measured by positive sequential progress, albeit in some instances significantly accelerated by pandemic responses, the impact of gambling regulation can be more abrupt and is often dislocating, at least in the short term.

The UK gambling market

The UK had relatively stable regulatory conditions between the implementation of Gambling Act in 2007 and the removal of high staking content from gaming machines in betting shops in 2019. However, it should be noted that the FOBT debate lasted from approximately 2012 before a final decision and implementation of a GBP 2 staking limit rather than the previous GBP 100. While this limit directly impacted approximately 70 per cent. of machine revenue (55 per cent. of shop revenue), approximately 30 per cent. of this was directly substituted into gaming machines meaning that the net impact per machine was an approximately 40 per cent. revenue reduction. Nevertheless, a combination of this revenue impact and responses to pandemic policy has meant that overall betting shop numbers have fallen from a peak of over 9,000 in 2014 to approximately 6,500 currently. While it is very early to say with certainty, both the economic and regulatory environment for UK retail betting market now seems to have stabilised.

In late 2014 the UK adopted Point of Consumption legislation for online gambling, meaning that all online operators needed a UKGC licence to service UK customers. The immediate impact of this change was to introduce a 15 per cent. tax, which was absorbed by the vast majority of operators (now 21 per cent. on gaming revenue including bonuses to mitigate the tax losses caused by FOBT stake reduction). However, the change also gave domestic jurisdiction to the UKGC and significantly increased scrutiny on operators. This has led to a number of high-profile enforcement actions on weak anti-money laundering and safer gambling procedures, many of which have had a material revenue impact. Notwithstanding the significant increase in enforcement activity and corresponding improvements in licensee systems and controls, political pressure mounted to the extent that the UK government has now begun a review of the Gambling Act, especially focussed on online elements of the legislation. While it is too early to provide any clarity on changes that are likely to occur, the following areas have gained significant stakeholder attention:

· restrictions on marketing;

· restrictions on the amount of money customers can spend without checks on whether their expenditure is sustainable;

· restrictions to game mechanics such as slots stakes; and

· increasing the powers of the UKGC and strengthening consumer redress.

Separately, and as with all jurisdictions, the UK gambling sector may face taxation pressure as governments look to fund the cost of pandemic policies and other programmes.

From an economic perspective, the UK is highly mature in terms of digital adoption and has seen a relatively sustained limited impact from pandemic policy responses. This is reflected in a more muted actual growth profile from 2017, which is also reflected in an expected 2019 - 2026E compound annual growth rate of 4.9 per cent. It should be noted that these revenue projections do not factor in material changes caused by the review of the Gambling Act since the measures and timings are uncertain, but do factor in a continued high tempo of regulatory enforcement and improvements to operator sustainability.

UK Online Market Net Revenue 2014-2026 (EUR million)

The Italian gambling market

The domestically licensed Italian online sector has been opened up by a number of government decrees over time, starting with sports betting (2006) and then adding poker and casino subsequently. Licences are available periodically through a tender process, with the next set of licences likely to be issued next year. While the absolute number of licences available is likely to halve, sector consolidation means that the actual business impact of this theoretical reduction in competition is likely to be limited, especially since Italy implemented a complete advertising ban in 2019.

As well as banning advertising and plans to restrict licences, Italy also increased online gambling taxes in 2019 (betting was increased 2 per cent. to 24 per cent. of gross gaming revenue and gaming was increased 5 per cent. to 25 per cent. of gross gaming revenue). In 2020, Italy introduced a 0.25 per cent. temporary tax on sports betting stakes to fund the cost of COVID-19 policy responses in relation to sport, though this is capped at EUR 40 million for 2020 and EUR 50 million for 2021 and due to lapse at the end of 2021. Despite recent volatility in Italy, a new regulator and increased political stability suggests a more benign regulatory outlook in the medium term, including potentially lifting advertising restrictions, in part to support sports stakeholders, which have been the biggest economic losers of the ban.

It should be noted that the 2019 advertising ban has had no discernible impact on the domestically licensed sector's growth profile, with Italy being one of the strongest growth markets through pandemic disruption, though it is likely that black-market activity has also grown given that Italian operators are now relatively less visible. Given the significant uptake in revenue during the pandemic period, Italy's growth curve is expected to be compressed. The majority of the 12 per cent. compound annual growth rate between 2019 and 2026 has therefore already been seen.

Italy Online Market Net Revenue 2014-2026E (EUR million)

The Spanish gambling market

Spain domestically regulated online gambling in 2012, with all products available by 2015 (slots, in-play betting) in a relatively open licensing system. Spain initially adopted a 25 per cent. gross gaming revenue tax (revenue and bonuses) across all products, but this was cut to 20 per cent. in 2018. Spain also had a liberal marketing regime, but political pressure has meant that from 2021 marketing and bonuses are now heavily restricted. A combination of limited pandemic uplift and increasing regulatory pressures leads us to be cautious on growth notwithstanding the potential for increased digital adoption, forecasting 2019 - 2026 revenue compound annual growth rate of 6.7 per cent.

Spain Online Market Net Revenue 2014-2026E (EUR million)

Fiscal-regulatory trends

As can be seen from the UK, Italy and Spain, each gambling regime in Europe is unique and responds to its own specific domestic needs (political, fiscal-regulatory, commercial, cultural). However, a number of fiscal-regulatory trends can nevertheless be identified across Europe:

· domestic or "point of consumption" licensing is now normal across Europe, only Norway, Finland and Hungary preserve significant monopolies of betting and gaming products;

· the level of advertising and marketing that online gambling creates (approximately 30 per cent. revenue vs. less than 5 per cent. for land-based) creates the political conditions for restrictions;

· a tax range of 20-25 per cent. is now more typical than 15-20 per cent.; and

· increasing focus on individual customer expenditure has increased during the pandemic (for example, Sweden and Belgium introduced pandemic-specific deposit limits).

These drivers are likely to shape continued fiscal-regulatory change. However, the sector has historically demonstrated resilience to these changes and a greater focus on safer gambling measures, if proportionate and evidence-based, can improve sector sustainability.

From a competitive standpoint, all European markets are highly local, with a different mix of domestic, regional, and international operators taking market share in each. As jurisdictions licence and conditions become more localised through regulatory conditions and consumer behaviour, aggregated market share increasingly becomes more of an outcome. Even in the UK, which is sometimes seen as an international homogenised market, a failure to gain a presence in domestic horseracing is the biggest single driver of international penetration failure (for example, Bwin), whereas all strong betting brands in the UK have a strong horseracing presence. In Italy, this applies to the domestic football multiple offer (i.e., the ability of customers to place a small stake bet for a big potential prize across several match outcomes). We therefore consider the competitive landscape for UK retail, UK online, Italy and Spain from a product positioning and regulatory standpoint.

European markets consolidation

The UK retail betting market has undergone significant consolidation over the last six years, driven by:

· M&A, most notably the Ladbrokes Coral merger and the divestment of shops to Betfred;

· the closure of independents, increasing the share of major operators; and

· the post-FOBT closure programme of William Hill, increasing the share of all others.

The chart below illustrates this in revenue terms, with the impact of the loss of GBP 100 stake machine content from Q2 2019 and then the impact of the pandemic clearly visible on overall revenue.

Due to the restriction of four machines per shop, the legacy nature of most estates and the rollout of broadly comparable SSBTs, the economics of individual shops are much more driven by location than differences between operators. With these dynamics stable, 2022 system-wide revenue should recover to approximately GBP 1.9 billion or 60 per cent. of pre-pandemic and GBP 100 stake loss levels.

UK Retail gambling revenue 2014-2025E (GBP million)

UK LBO total revenue 2014-2025E (GBP million)

UK LBO operators total revenue (GBP million) and average weekly revenue per shop (GBP thousands) by Operator 2020

The UK online gambling market is consolidated around leading betting-led brands and two very strong gaming operators. These six groups captured 78 per cent. of the total UK online market in 2020. This has been driven by a combination of M&A (Flutter, Entain) and operational outperformance of market leaders (SkyBet - now part of Flutter, bet365, Gamesys, 888). It should be noted that 888 is the only major operator in the top six portfolio which was not originally a domestic UK-centric brand (excluding Paddy Power as Irish, which immediately targeted the UK as its main market due to cultural similarities and the relative size of the Irish vs. UK markets).

The Company believes the UK retail presence of William Hill creates an opportunity for the 888 Group to build an omni-channel strategy, to promote the 888 Group's brands and create cross-selling prospects, as well to improve customer retention, and reactivation of pre-COVID-19 customers.

Italy is similarly consolidated to the UK, with the top eight group operators controlling 73 per cent. of the domestically licensed market. The patterns are similar to the UK, with the top five all having a strong local retail presence (Entain acquired a number of domestic operators). Of the remaining three all can be explained by product specialisms: bet365 is the market leader in in-play betting; Flutter is the market leader in poker; 888 is the market leader in casino excluding domestic competition.

Spain is a different market to the UK and Italy because its local operators were weaker digitally when the market legislated in 2012. Consequently, while the market is similarly consolidated, with the top eight operators controlling 79 per cent. of the market, these operators are overwhelmingly international in focus. Within the top eight only Sportium (Cirsa) and Codere can be considered domestic, although Gamesys and William Hill have semi-localised offers. It is possible that this lack of localisation is one of the factors which is holding back growth.

UK Remote NGR by Operator in 2020 (GBP million)

Spain Remote NGR by Operator in 2020 (EUR million)

Italy Remote NGR by Operator in 2020 (EUR million)

Section B: Regulatory Overview

INTRODUCTION

The betting and gaming industry is highly regulated and the regulation of, and approach to, online gaming varies from jurisdiction to jurisdiction. To the extent that it is regulated, governments tend to either prohibit gaming or authorise it under licence whilst generating revenue from licence fees and taxation.

In many jurisdictions, existing laws were enacted prior to the development of the internet and were designed to address and regulate offline gaming operations. The application of these laws to online gaming is still to be clarified in many jurisdictions and regulatory regimes specifically for online gaming are still being developed. This gives rise to uncertainty as to the legal status of online gaming in some jurisdictions.

The 888 Group's headquarters is located in Gibraltar, its licensed entities are located in Gibraltar, Malta, Spain (Ceuta) and the US state of New Jersey, and the IT functionality to run its betting and gaming operations is located in Gibraltar and Ireland. Additional service functions are located in Israel, Romania, Ireland, Spain (Ceuta), the US (New Jersey) and the UK. The 888 Group is also licensed in Denmark, Italy, Portugal, Sweden, the German State of Hesse and the US states of Nevada, Delaware, New Jersey, Michigan, Pennsylvania, Colorado, Virginia and the Canadian province of Ontario. The 888 Group has applied or is in the process of applying for licences in the Netherlands and the German State of Saxony-Anhalt.

The Target Business operates from a number of key sites across the UK, Gibraltar, Malta, Bulgaria, Poland, Italy, Spain and the Philippines, as well as operating LBOs in the UK. The Target Business is licensed to operate betting and gaming services in Gibraltar, Malta, Denmark, the UK, Italy, Ireland, Spain, Sweden, Argentina, Colombia, Jersey and Latvia.

The nature of the 888 Group's and the Target Business' business is, and, following Completion, the Enlarged Group's business will be, such that it is accessible by customers in many jurisdictions including those in which operators and/or their customers may, by local law, be prohibited from engaging in online gaming. Breach of any applicable local laws could give rise to criminal prosecutions, administrative action or civil claims in the relevant jurisdictions. Further, in certain jurisdictions the advertising of online gaming services and the processing of payments may also be prohibited and subject to enforcement actions. The application and enforcement of any local laws to an online operator located and regulated offshore, and which does not have a physical presence in the relevant jurisdiction, may in some cases be uncertain.

A summary of the regulatory regimes in those markets in which the Company expects the Enlarged Group to generate more than 5 per cent. of its revenue after Completion, and the additional jurisdictions in which the Enlarged Group will have a physical presence is set out below.

The Proposed Acquisition and the resulting change of control of the Target Business will require notifications to, or regulatory approvals from, the relevant authorities either prior to or following Completion. These requirements result from the regulations or licensing conditions applicable to the licences held by the 888 Group or the Target Business. 888 and the Target Business are working with local counsel in each of the relevant jurisdictions to ensure that all necessary approvals and/or notifications are obtained or submitted, as appropriate, in a timely manner. The Company believes that all necessary approvals should be forthcoming; however there can be no assurance that the 888 Group or the Target Business will be able to obtain certain necessary approvals within a timescale acceptable to 888 or Caesars, or that they may only be obtained subject to certain conditions or undertakings which may not be acceptable to 888 or Caesars, or at all.

GENERAL REGULATORY FRAMEWORK

888 and William Hill Limited are, and following Completion, 888 as the holding company of the Enlarged Group, will be Gibraltar-registered public limited companies. The 888 Group and the Target Business are each licensed by the Gibraltar Licensing Authority pursuant to the Gibraltar Gambling Act to undertake remote betting and gaming activities in Gibraltar and are regulated by the Gibraltar Gambling Commissioner. The provision of online betting and gaming services by companies based in Gibraltar is regulated and licensed under the provisions of the Gibraltar Gambling Act.

The local laws relevant to the betting and gaming industry in many jurisdictions were enacted prior to the development of the internet and were designed to address and regulate terrestrial gaming activities, primarily those conducted within the territory of that jurisdiction. The scope of the application of these laws to online gaming activity, specifically when provided by foreign operators, therefore remains unclear.

Under international conflict-of-law principles which are applicable to the operational entities within 888 and the Target Business as Gibraltar-registered companies and which, following Completion, will be applicable to a number of the operational entities within the Enlarged Group, the validity of a wagering contract is to be determined in accordance with the law applicable to the contract. Normally, this would be the law of the location where the bet or wager was accepted, not where it was placed. The European Community's 1980 Rome Convention on the Law Applicable to Contractual Obligations (the "Convention") follows the same logic. Article 3 of the Convention states that absent a positive determination by the parties of the applicable law, a contract shall be governed by the law of the country with which it is most closely connected. In the case of wagering contracts, this would generally be the territorial law applicable to the party who offers the facility for placing the wager (i.e. the "casino" or book maker). Within the EU, Regulation (EC) No. 593/2008 of the European Parliament and the Council of 17 June 2008 on the law applicable to contractual obligations (the "Regulation") applies. Pursuant to Article 3 of the Contractual Obligations Regulation, a contract shall be governed by the law expressly chosen by the parties or clearly demonstrated by the terms of the contract. Article 6 paragraph 2 of the Contractual Obligations Regulation allows contracts with consumers to provide for an applicable law different from that of the consumer's habitual residence.

The 888 Group and the Target Business, with the help of their legal advisers worldwide, continually review and assess the impact of local regulatory regimes applicable to online gaming. The 888 Group and the Target Business regularly receive and, following Completion, the Enlarged Group will regularly receive, updates on regulatory developments in target markets, and instruct its respective group companies on how to bring operations in line with applicable legal requirements. This includes blocking or restricting the offering of online gaming or betting in jurisdictions where this is required under applicable law or where other considerations (such as commercial viability) dictate a withdrawal from the market. This can be achieved through various methods, including IP-based blocking, filtering based on customers' addresses, blocking of payment methods issued in certain jurisdictions, and other methods commensurate with industry best practices. Similarly, the 888 Group and the Target Business tailor, and following Completion, the Enlarged Group will tailor, marketing activities to meet applicable restrictions.

JURISDICTIONS FROM WHICH THE DIRECTORS EXPECT THE ENLARGED GROUP TO GENERATE MORE THAN 5 PER CENT. OF ITS REVENUE AFTER COMPLETION

The 888 Group and the Target Business generate, and following Completion, the Enlarged Group will generate, the majority of revenues over 5 per cent. in the UK and in Italy. Other individual markets can be divided into the following main groups: European Union, Middle East, Africa and the Americas.

United Kingdom

Online betting and gaming in Great Britain is regulated by the Gambling Act and the regulations and licensing conditions and codes of practice enacted by the regulator, the UKGC. According to the Gambling Act, a remote operating licence is required for the provision of online gaming if at least one piece of remote gaming equipment used in the provision of gaming facilities is placed within the UK; or if no such equipment is placed in the UK, but the gaming facilities provided are used or capable of being used there. In addition, the UK regulatory regime requires remote gaming operators to source their software from suppliers licensed by the UKGC.

Both the 888 Group and the Target Business hold gaming operating licences, online and retail, issued by the UKGC, and the Enlarged Group will do so after Completion. The services offered to UK customers by the 888 Group, the Target Business and which, following Completion, will be offered by the Enlarged Group, are on the basis of these licences.

As described in the risk factor titled "The business of the Enlarged Group may be exposed to litigation proceedings and regulatory and compliance risks in various jurisdictions across the world" in the section of this Appendix titled "Risk Factors", the UKGC imposed a financial penalty of GBP 9.4 million on the 888 Group in respect of social responsibility and anti-money laundering failings following a compliance assessment which concluded in October 2020. Similarly, following a compliance assessment conducted in July and August 2021, the William Hill Group is subject to an ongoing licence review and is addressing certain action points raised by the UKGC in relation to William Hill's social responsibility and anti-money laundering obligations. The Target Business has recorded a provision of GBP 15.0 million in its financial statements for Target FY 2021 to cover potential cash outflows resulting from any regulatory sanctions and associated costs resulting from this compliance assessment and licence review. Certain licenced entities within the Target Business also have the benefit of an indemnity provided by Caesars under an agreement dated 8 March 2022 to apply to certain losses and costs that may arise in the event any of the relevant operating licences are suspended or are subject to conditions imposed by the UKGC in connection with the licence review.

Both the 888 Group and the Target Business hold, and following Completion, the Enlarged Group will hold, gaming software licences issued by the UKGC, which allow them to provide gaming related software to the UK market.

European Union

EU law plays an important role in assessing the legality of the offering of betting and gaming services by operators licensed in one or more EU Member States to customers in other EU Member States. In many EU Member States, there have been attempts by regulatory and prosecutorial authorities, and monopoly operators, seeking to impose domestic administrative prohibition orders, to initiate criminal and administrative sanctions, to initiate civil proceedings or to impose other restrictive measures against online operators licensed in other EU Member States, with a view to preventing such operators from offering their services to domestic customers. Such measures have often been inconsistent with the principles of EU law, in particular those enshrined under Articles 49 and 56 of the Treaty on the Functioning of the European Union ("TFEU") which guarantee the freedom of establishment and the freedom to provide services. Such inconsistency resulted from domestic legal regimes which restrict either the freedom of establishment or the freedom to provide services and which could, as a result, be unenforceable or void.

The efforts by certain state authorities and licensees to restrict the cross-border supply of online gaming have given rise to litigation in the national courts of a number of Member States, which have resulted in multiple references of questions of EU law to the CJEU under Article 267 TFEU and so leave the position of the 888 Group, the Target Business, and, following Completion, the Enlarged Group unclear with regard to a number of points, as described in the risk factor titled "There have been and continue to be attempts by various persons in EU Member States to apply domestic criminal and administrative laws to prevent online gaming operators licensed in other EU Member States from operating in or providing services to customers within their territory; the case law of the CJEU on this issue continues to evolve creating uncertainty for online gaming operators" in the section of this Appendix titled "Risk Factors".

In Gambelli and others (Case C-243/01), decided in November 2003, the CJEU held that national law restrictions on the cross-border supply of online gaming services could give rise to restrictions on the freedom to provide services and the freedom of establishment under Articles 49 and 56 TFEU, and that restrictions of that kind were capable of being justified on public interest grounds (such as consumer protection, the prevention of fraud or, as the Italian government argued in the Gambelli case itself, the reduction of opportunities for the public to participate in gaming). However, such restrictions could only be justified if they were applied in a non-discriminatory manner and in a manner which was "consistent and systematic". Those requirements are not satisfied, and EU Member States cannot invoke public order concerns, where the authorities of that EU Member State incite and encourage consumers to participate in gaming to the financial benefit of the public purse.

In Placanica and others (Case C-338/04), in 2007, the CJEU held that a blanket exclusion of companies quoted on regulated markets from tendering procedures for the award of gaming licences went beyond what was necessary in order to achieve the objective of preventing gaming operators from being involved in criminal or fraudulent activities. The CJEU also held that Articles 49 and 56 TFEU must be interpreted as precluding national legislation which imposes a criminal penalty on persons for pursuing the organised activity of collecting bets without a licence or a police authorisation (as required under the national legislation), where those persons were unable to obtain licences or authorisations because that EU Member State, in breach of EU law, refused to grant licences or authorisations to such persons.

In September 2009, the CJEU handed down its ruling in a referral from the Portuguese courts in Liga Portuguesa de Futebol Profissional and bwin International Ltd v Departamento de Jogos da Santa Casa da Misericordia de Lisboa (Case C-42/07). The CJEU recalled that national legislation can only be appropriate for ensuring the attainment of the objective it purports to pursue if it genuinely reflects a concern to attain that objective in a consistent and systematic manner. It held that the grant of exclusive rights to operate games of chance via the internet to a single operator, such as the then-Portuguese monopoly operator Santa Casa, which was subject to strict control by the public authorities, may, in circumstances such as those in the main proceedings, be regarded as appropriate for the purpose of protecting consumers against fraud on the part of operators. In the absence of EU harmonisation, the CJEU rejected the existence of an obligation on EU Member States to recognise gaming licences issued by other EU Member States, and held that an EU Member State is entitled to take the view that the mere fact that a gaming operator which lawfully offers online gaming services in another EU Member State is subject to regulation in that EU Member State, cannot be regarded as amounting to a sufficient assurance that national consumers will be protected against the risks of fraud and crime.

On 8 September 2010, the CJEU handed down rulings in a number of cases referred by the German courts, namely Markus Stofi et al (Joined Cases C-316/07, C-358/07 to 360/07, C-409/07 and C-410/07), Winner Wetten (Case C-409/06) and Carmen Media (Case C-46/08). In those cases, the CJEU held that, while an EU Member State was permitted under EU law to establish a public monopoly on gaming activities (so long as the requirements in Gambelli were met), the monopoly established by the German State Treaty on Gambling failed to pursue its stated objectives of preventing incitement to squander money on gaming, combating gaming addiction, and protecting young people in a consistent and systematic manner. Elaborating on the latter requirement, the CJEU noted that a monopoly may not advertise to encourage consumers to participate in gaming, and that any advertising issued by the holder of a public monopoly must remain measured and strictly limited to what is necessary in order thus to channel consumers towards authorised gaming networks. Second, a monopoly can no longer be justified if in relation to more addictive games of chance which are not covered by the public monopoly (such as casino games and slot machines) the competent authorities conduct or tolerate policies aimed at encouraging participation in those other games rather than reducing opportunities for gambling and limiting activities in that area in a consistent and systematic manner. The CJEU concluded that the monopoly established by the German State Treaty did not pursue its objectives in a consistent and systematic manner. It also held that an EU Member State may not apply a criminal penalty for failure to complete an administrative formality where such completion has been refused or rendered impossible by the EU Member State concerned, in infringement of EU law.

With regards to the ban on online gaming in the German State Treaty on Gambling, the CJEU acknowledged that a prohibition of any offer of games of chance via the internet may, in principle, be regarded as suitable for pursuing the legitimate objectives of preventing incitement to squander money on gambling, combating gaming addiction and protecting young persons, even though the offer of such games remains authorised through more traditional channels. In this context, the CJEU noted that the referring court had not been specific about its concerns in that regard. Therefore, the CJEU's examination was limited to the question of whether a complete ban on internet gaming may, in principle, be regarded as suitable for achieving the objectives of preventing incitement to squander money on gaming, combating gaming addiction, and protecting young people.

On 15 September 2011, the CJEU ruled on the matter of Dickinger and Omer (C-347/09). The Court noted that a monopoly on games of chance constitutes a restriction of the freedom to provide services but that such a restriction may nevertheless be justified by overriding reasons in the public interest, such as the objective of ensuring a particularly high level of consumer protection. To be consistent with the objective of fighting crime and reducing opportunities for gambling, national legislation establishing a monopoly which allows the holder of the monopoly to follow an expansionist policy must genuinely be based on a finding that the crime and fraud linked to gaming are a problem in the EU Member State concerned, which could be remedied by expanding authorised regulated activities. The CJEU emphasised that the objective of maximising public revenue alone cannot permit such a restriction of the freedom to provide services. The CJEU also stated that only advertising which is moderate and strictly limited to what is necessary to channel consumers towards controlled gaming networks is permissible. An expansionist commercial policy whose aim is to expand the overall market for gaming activities is not consistent with the objective of fighting crime and fraud. However, the CJEU also ruled that, given the absence of harmonisation at EU level regarding online gaming, no duty of mutual recognition of authorisations issued by other EU Member States can exist in the current state of EU law. A similar ruling was handed down on 13 September 2013 in the matter of Biasci et al (C-660/11).

On 30 April 2014, the CJEU ruled on another Austrian case, Pfleger and others (C-390/12). The CJEU confirmed its case law on national gaming legislation being compliant with EU law only if the declared public interest objectives are not only theoretically, but also actually pursued in a consistent and systematic manner. The CJEU further ruled that the burden of proof regarding the proportionality and consistency of a measure rests with the EU Member States and reiterated that, where a restrictive system has been established and that system is incompatible with the freedom to provide services, an infringement of that system by an economic operator cannot give rise to penalties.

On 28 February 2018, the CJEU ruled on a Hungarian case, Sporting Odds Ltd (C-3/17). The CJEU rules that the Hungarian legislation relating, inter alia, to the organisation of online casino games was not compatible with the EU law principle of freedom to provide services, due to the legislation including discriminatory restrictions which the CJEU ruled could not be justified by the objectives of public order and public health, because those objectives may have been attained by less restrictive measures.

There has been an uptick in EU Member States introducing gaming legislation and regulation conforming with EU law in recent years. For example, during 2020-2021 the regulatory landscape in Germany underwent drastic changes, with the introduction of federal sports betting licences, the adoption of a temporary toleration regime for online casino products and the introduction of an online slots and poker licensing regime in the state of Saxony-Anhalt. In the Netherlands, a new Online Gambling Act entered into force in 2021, launching an online betting and gaming licensing regime.

In past years, the European Commission initiated infringement proceedings, including before the CJEU, against EU Member States whose laws regulating online betting and gaming infringe EU law and the market freedoms guaranteed by the TFEU. Examples include Greece, Belgium, Cyprus, the Czech Republic, Lithuania and Poland. The Company believes that domestic legislation in EU Member States that is inconsistent with the principles of EU law, as interpreted in the jurisprudence of the CJEU, is unenforceable and may be void, and therefore cannot impede the offering of online betting and gaming services to customers in those jurisdictions.

Italy

Online betting and gaming in Italy is regulated by the Agenzia delle Dogane e dei Monopoli (ADM). In accordance with the relevant Decrees regulating online betting and gaming, licences from ADM are necessary for the provision of online gaming services in Italy. Licences are only awarded through a tender process which opens from time to time and which is specially announced in advance.

Both the 888 Group and the Target Business hold gaming operating licences, issued by ADM, and the Enlarged Group will do so after Completion. The services offered to Italian customers by the 888 Group, the Target Business and which, following Completion, will be offered by the Enlarged Group, are on the basis of these licences.

Middle East, Africa and South America

Both the 888 Group and the Target Business provide services to certain jurisdictions in the Middle East, Africa and South America, based on online betting and gaming licences which are widely referred to as "dot.com" or "point of supply" licences. For completion, these "dot.com" licences differ in nature to "dot.country" or "point of consumption" licences, which are territory specific. "dot.com" licences enable the supply of online betting and gaming to other jurisdictions, in accordance with those licences' regulations and under the governance of the relevant regulator and regulatory regime, based on the principle of Internet legislation that deems the provision of an online product as provided where the operator is established and located. The 888 Group and the Target Business hold such licences in Malta, Gibraltar and Jersey.

The determination by the 888 Group, the Target Business and, following Completion, the Enlarged Group as to whether or not to permit customers in a given jurisdiction to access any one or more of their products under a "dot.com" licence, is and will be made on the basis of a measured and prudent approach to legislation, regulatory compliance and in accordance with the policy adopted by the respective board. Such decisions are based on a number of factors, which include:

· the laws and regulations of a jurisdiction;

· state, federal, national or supra-national law, including EU law if applicable;

· the approach to the application or enforcement of such laws and regulations by regulatory and other authorities, including the approach of such authorities to the extraterritorial application and enforcement of such laws and the willingness or ability (or absence thereof) of such authorities to take enforcement action;

· the terms of the betting and gaming licences of the 888 Group, the Target Business and, following Completion, the Enlarged Group (as applicable);

· any offline presence or retail operations in the jurisdiction; and

· any changes to these factors.

Where any jurisdiction has in place a clear national prohibition of offshore online services, and such prohibition is set out in legislation that has a clear extra-territorial application, all measures will be implemented to prevent access to the services from that jurisdiction. 

Set forth below is an overview of the 888 Group and the Target Business' dot.com licences:

Gibraltar

Online betting and gaming in Gibraltar is regulated under the provisions of the Gibraltar Gambling Act. Part VI of the Gibraltar Gambling Act, "Remote Gambling", is the basis for nearly all aspects of Gibraltar's online betting and gaming regulatory regime. In addition to the Gibraltar Gambling Act, the Gibraltar Gambling Commissioner issued "Codes of Practice", which, by virtue of section 6(6)(f) and 6(7) of the Act, are authoritative in nature.

Both the 888 Group and the Target Business are, and following completion, the Enlarged Group will be, licensed to undertake remote betting and gaming activities in Gibraltar. The 888 Group is headquartered in Gibraltar. Some of the servers which support the gaming activities of the 888 Group are also located in Gibraltar.

The licences held by each of the 888 Group and the Target Business in respect of their online activities in Gibraltar as valid of a period of five years, and are automatically renewed each year during the five-year period, unless there has been a breach of any term or condition of the licence agreement which has not been rectified within 90 days of notification of the breach to the licensee.

Malta

Online betting and gaming is regulated in Malta under the Maltese Gaming Act 2018. No person shall provide or carry out a gaming service or provide a critical gaming supply from Malta or to any person in Malta, or through a Maltese legal entity, except when in possession of a valid licence by the Maltese Gambling Authority (MGA), the primary regulatory body responsible for the governance of all betting and gaming activities in Malta. For the avoidance of any doubt, a gaming service is defined as the act of making a game available for participation by players, whether directly or indirectly, and whether alone or with others, as an economic activity whilst a critical gaming supply is defined as a material supply which is (a) indispensable in determining the outcome of a game or games forming part of the gaming service; and, or (b) an indispensable component in the processing and, or management of essential regulatory data. The Maltese regulatory framework therefore provides for two types of licensure, a B2B licence and a B2C licence. MGA approval is required for each game type to be offered under the licence. The term of the licences is ten years.

As Malta is part of European Union it is subject to EU law, including the EU principle on the free movement of services. In accordance with the aforementioned, Maltese gaming licences entitle licensees to provide online gaming services from Malta or to any person in Malta, or through a Maltese legal entity in compliance with Member States' local regulatory regime.

Both the 888 Group and the Target Business are, and following completion, the Enlarged Group will be, licensed to undertake remote betting and gaming activities in Malta.

Jersey

Online betting and gaming in Jersey is regulated by the Jersey Gambling Commission. The Target Business is, and following completion, the Enlarged Group will be, licensed to provide betting facilities from a dedicated premises in Jersey.

North America

USA

Provision of remote betting and gaming services to US customers is subject to legislation at both a federal and state level in the United States. The Unlawful Internet Gambling Enforcement Act 2006 ("UIGEA") is the principal federal statute relating to online gaming, and contains prohibitions on, inter alia, the processing by financial institutions of payments to and from unlawful internet betting and gaming operators.

On 23 December 2011, the US Department of Justice ("DOJ") released a memorandum ("2011 DOJ Memorandum") which addressed in detail, for the first time, a long-disputed legal question, namely, whether the Wire Act (18 U.S.C 1084) applies to all forms of gambling or whether its scope is more limited and covers only sports betting and no other forms of gambling. The DOJ's longstanding position has been that the Wire Act prohibits "the transmission in interstate or foreign commerce of bets or wagers" with respect to all forms of gambling, while many legal scholars (and foreign gaming operators which relied on their opinions) contended that the Wire Act only prohibits the transmission of bets or wagers "on any sporting event or contest" but does not apply to other forms of gaming (such as online poker and casino games). The 2011 DOJ Memorandum reversed the DOJ's position and concluded that the Wire Act applies only to sports betting and hence does not apply to internet gaming or online lotteries. 

In January 2019, the DOJ published an updated memorandum, reversing the position and concluding that the Wire Act applies to sports betting as well as to other forms of gambling. This memorandum was successfully challenged by New Hampshire's lottery and its providers, with the court ruling that the Wire Act applies solely to interstate sports betting. In January 2021, the federal Court of Appeals for the First Circuit denied an appeal by the US Department of Justice seeking to uphold a 2019 memo on the scope of the federal Wire Act. By denying the appeal, the Court confirmed the previous opinion from 2011, which concluded that the Act applies only to sports betting. The case may eventually reach the U.S. Supreme Court.

In parallel to the Wire Act interpretation developments, on 14 May 2018, the U.S. Supreme Court struck down the Professional and Amateur Sports Protection Act of 1992 ("PASPA") as unconstitutional. This decision had the effect of lifting federal restrictions on sports betting and thus allows states to autonomously determine the legality of sports betting in their state. Since the repeal of PASPA, several US states have legalised and regulated online sports betting, with more states joining the ranks of regulation by the month.

The 888 Group is, and following completion, the Enlarged Group will be, licensed in various US states. The 888 Group is currently licensed in New Jersey, Nevada, Delaware, Pennsylvania, Colorado, Michigan and Virginia.

Canada

The online provision of gambling services to Canadian customers is primarily regulated by the Canadian federal Criminal Code. The Criminal Code places a prohibition on provision of gambling services unless these are operated by a provincial government (meaning through a provincial lottery corporation).

On a provincial level, Ontario enacted legislation in December 2020 which provided for regulation and licensing of private companies, which would allow private operators to provide gambling services through the provincial government. This legislation established a new subsidiary of the Alcohol and Gaming Commission of Ontario ("AGCO"), named iGaming Ontario ("iGO"), to conduct and manage the online gaming offerings in Ontario in partnership with private companies. AGCO remains the regulator of all services in order to meet the requirements of the Criminal Code. Based on this new provincial regulatory framework, online gambling in the Canadian province of Ontario have gone live on 4 April 2022, with private operators being awarded licenses from AGCO.

ADDITIONAL JURISDICTIONS IN WHICH THE ENLARGED GROUP WILL HAVE A PHYSICAL PRESENCE AFTER COMPLETION

Israel

The 888 Group holds, and following Completion, the Enlarged Group will hold, subsidiaries which are incorporated in Israel. In each case, the subsidiaries operate research and development facilities in Israel and maintain servers for various ancillary and support functions, such as data-mining. The 888 Group and the Target Business do not, and following Completion, the Enlarged Group will not, allow Israeli residents to participate in online gaming on its websites by blocking registrations by customers stating Israel as their country of residence, blocking access from internet servers with internet protocol addresses from Israel and refusing to accept payments from credit cards issued by banks in Israel.

Subject to certain exceptions, the Israeli Penal Law 1977 (the "Penal Law") prohibits the organisation or conduct of, and participation in, gaming in Israel. There is no legislation which specifically regulates online gaming in Israel although some courts have stated that the provisions of the Penal Law may be construed to apply to online gaming. However, the Company believes that the 888 Group and the Target Business do not, and following Completion, the Enlarged Group will not, facilitate, offer or provide gaming activities prohibited under the Penal Law to Israeli residents, and therefore, no offence is committed wholly or in part within Israel.

Romania

The 888 Group holds, and following Completion, the Enlarged Group will hold, a subsidiary which is incorporated in Romania, that operates a research and development facility within Romania.

The current regulatory regime in Romania is governed by Emergency Ordinance 77/2009 as amended. According to the applicable regulatory regime, the organisation and operation of online gambling in Romania requires a licence from the local gambling office. The 888 Group and Target Business hold, and following Completion, the Enlarged Group will hold, through their subsidiaries, licences issued by the Romanian gaming regulator, the National Office for Gambling ("NOG").

Spain (Ceuta)

The 888 Group holds, and following Completion, the Enlarged Group will hold, a subsidiary incorporated in Spain (Ceuta). Service functions for the 888 Group are located in Ceuta.

Spanish Law 13/2011 of 27 May 2011 (Ley 13/2011, de 27 de mayo, de regulacion del Juego) ("Spanish Law") sets out the general legal framework for the offering of online gaming in Spain. According to Spanish Law, operators who wish to offer online gaming services in Spain are required to obtain general gambling and betting licences which cover the activities they wish to offer, and then apply for a specific licence for each individual game variant.

The 888 Group and Target Business hold, and following Completion, the Enlarged Group will hold, through their subsidiaries, online betting and gaming licences issued by the Spanish gaming regulator, Directorate General for the Regulation of Gambling ("DGOJ").

Ireland

The 888 Group holds, and following Completion, the Enlarged Group will hold, a subsidiary incorporated in Ireland, in addition to data centres located in Ireland.

The Irish general regulatory framework is, at present, partially regulated by way of the 1931 Betting Act. The Act was amended in 2015 to include regulation for online bookmaking, regulated by the Irish Revenue Commissioners Office, and licences for online bookmakers are required for operators servicing the Irish market by providing sports betting services. The nominated officers of licence applicants must undergo personal licensure and hold a Tax Clearance certificate in addition to a Certificate of Personal Fitness (COPF). With respect to online casino games, these are provided based on a "dot.com" licence, as explained in depth above. 

In January 2021, the Irish Department of Justice has published plans to carry out a reform of the Irish gambling regulatory regime within the course of 2021. This reform has been expected since as early as 2013, with a draft Gambling Control Bill being drafted. According to the publication, the reform would entail a major update to the said draft Bill. This latest publication contradicts earlier media statements by government officials in October 2020, stating that the reform would not be concluded prior to 2023.

Bulgaria

The Target Business holds, and following Completion, the Enlarged Group will hold, a subsidiary which is incorporated in Bulgaria. The subsidiary provides business process services, such as fraud prevention checks, safer gambling support, KYC checking and customer services desks. Neither the Target Business nor the 888 Group offer and, following Completion, the Enlarged Group will not offer remote gambling services directly from this Bulgarian entity. The activities of the Target Group's Bulgarian subsidiary and, following Completion, the Enlarged Group's Bulgarian subsidiary does not currently require a licence.

The current regulatory regime in Bulgaria is governed by the 2012 Gambling Act. According to the applicable regulatory regime, the organisation and operation of online gambling in Bulgaria requires a licence.

Poland

The Target Business holds, and following Completion, the Enlarged Group will hold, a subsidiary which is incorporated in Poland. The subsidiary provides information technology services, such as technical development and system and help desk support functions. Neither the Target Business nor the 888 Group offer and, following Completion, the Enlarged Group will not offer remote gambling services directly from this Polish entity. The activities of the Target Group's Polish subsidiary and, following Completion, the Enlarged Group's Polish subsidiary does not currently require a licence.

The regulatory regime in Poland is governed by the Gambling Act and its Amendments. According to the applicable regulatory regime, the organisation and operation of online gambling in Poland requires a licence for betting, and there is a state monopoly in place for online casino games.

Philippines

The Target Business holds, and following Completion, the Enlarged Group will hold, a subsidiary which is incorporated in the Philippines. The subsidiary provides business process services, such as fraud prevention checks, safer gambling support, KYC checking, customer services desks and accounting support. Neither the Target Business nor the 888 Group offer and, following Completion, the Enlarged Group will not offer remote gambling services directly from this Philippine entity. The activities of the Target Group's Filipino subsidiary and, following Completion, the Enlarged Group's Filipino subsidiary does not currently require a licence.

The main laws setting out the general legal framework for the offering of online betting and gaming in the Philippines are the Revised Penal Code and Executive Order no. 13 of 2017. According to the applicable regulatory regime, the organisation and operation of online gambling in the Philippines requires a licence for offshore facing online betting and gaming.

OPERATING AND FINANCIAL REVIEW RELATING TO THE TARGET BUSINESS

The information in this section is based on unaudited management accounts of the Target Business and remains subject to change. The final version will be included in the Combined Prospectus and Circular that is expected to be published in the coming weeks.

The following discussion and analysis is intended to assist in providing an understanding of the Target Business' financial condition and results of operations for Target FY 2021, Target FY 2020 and Target FY 2019 and as at the end of each such period.

Some of the information contained in this section contains certain forward-looking statements that reflect plans, estimates and belief and that may involve risks and uncertainties. The Target Business' actual results may also differ materially from those discussed in these forward-looking statements. Factors that could cause or contribute to such risks, uncertainties and/or differences include, but are not limited to, those discussed below and elsewhere in this Appendix, including under the section of this Appendix titled "Risk Factors".

OVERVIEW

On 22 April 2021, Caesars Entertainment, Inc., a US-based gaming-entertainment company, completed its acquisition of the entire issued share capital of William Hill Limited. Prior to the Caesar Acquisition, William Hill Limited operated three distinct segments: William Hill Online, William Hill Retail and William Hill US. For financial reporting purposes, certain centralized corporate functions were reported under a further corporate segment ("Corporate"). William Hill US was created in 2012 by merging three small sports book operators under the William Hill brand, initially providing the group with access to Nevada, and eventually providing access to 26 states in the US in 2021 following the US Supreme Court's 2018 decision in respect of PASPA. Following the acquisition, Caesars is seeking to consolidate its core business by retaining the William Hill US business, and has proposed to sell the Target Business to 888, comprised of William Hill Online and William Hill Retail, pursuant to the Sale and Purchase Agreement. In anticipation of the Proposed Acquisition, the Target further segmented operations by splitting William Hill Online into UK Online and International Online. Corporate operations will also be transferred pursuant to the Sale and Purchase Agreement. The Target Group includes the Target Business and its subsidiary undertakings and, where the context requires, its associated undertakings, in each case, following the implementation of the Reorganisation.

The Target Business is comprised of William Hill Online, a leading online betting and gaming provider to customers primarily in the UK (under its UK Online segment) and Southern Europe, Central Europe and the Nordics (under its International Online segment), and William Hill Retail, which operates 1,407 LBOs throughout the UK as at 31 December 2021. The overall revenue of the Target Business for Target FY 2019, Target FY 2020 and FY 2021 was GBP 1,455.3 million, GBP 1,157.0 million and GBP 1,241.4 million, respectively.

KEY PERFORMANCE INDICATORS

The Target Business uses certain IFRS financial metrics, such as revenue, gross profit and operating profit to assess its financial performance, as well as certain key performance indicators, such as the number of retail shops, Target Adjusted EBITDA and Target Adjusted Operating Profit/(loss) which in its view provide alternative measures with which to monitor its economic, financial and operating performance. These measures have been provided for informational purposes only and are not indicative of historical operating results, nor are they meant to be predictive of future results. These measures are used to monitor its underlying performance and operations. However, certain of these measures are non-IFRS measures and should not be considered as an alternative to similar measures calculated and presented in accordance with IFRS.

Number of Retail Shops

The number of retail shops represents the total number of LBOs operated by William Hill Retail in a given period. The following table shows the total number of retail shops operated by the Target Business for the periods indicated:

Target Adjusted EBITDA

The Target Business uses Target Adjusted EBITDA, Retail Adjusted EBITDA, UK Online Adjusted EBITDA, International Online Adjusted EBITDA and Corporate Adjusted EBITDA as a means to measure the profitability of the Target Business, the William Hill Retail business, the UK Online business, the International Online business and its corporate costs, as applicable. Target Adjusted EBITDA is calculated as net (loss)/profit for the period , deducting tax, finance expenses and finance income, operating exceptional items and adjustments, depreciation, and amortisation for the Target Group. Target Adjusted EBITDA for each segment is calculated as adjusted operating profit adjusted for depreciation and amortisation for the William Hill Retail business, the UK Online business, the International Online business and the Target Business' corporate costs, as applicable. The following table shows Target Adjusted EBITDA for the Target Group and by segment for the periods indicated.

Target Adjusted EBITDA and the related measures by segment are non-IFRS measures and should not be considered in isolation or as a substitute for analysis of the Target Business' operating results as reported under IFRS. Not all companies calculate EBITDA-based measures in an identical manner and therefore it may not be comparable to other similarly titled measures used by other companies and may have limitations as an analytical tool.

Reconciliation of Target Adjusted EBITDA, Retail Adjusted EBITDA, UK Online Adjusted EBITDA, International Online Adjusted EBITDA and Corporate Adjusted EBITDA for the Target Group

The Target Group presents Target Adjusted EBITDA, Retail Adjusted EBITDA, UK Online Adjusted EBITDA, International Online Adjusted EBITDA and Corporate Adjusted EBITDA since they are key measures the analyst community uses to evaluate the Target Group and compare it to its peers. The table below illustrates the way in which the Target Group calculates Target Adjusted EBITDA figures for the periods indicated.

The table below illustrates the way in which the Target Group calculates Retail Adjusted EBITDA figures for the periods indicated. 

The table below illustrates the way in which the Target Group calculates UK Online Adjusted EBITDA figures for the periods indicated. 

The table below illustrates the way in which the Target Group calculates International Online Adjusted EBITDA figures for the periods indicated.

The table below illustrates the way in which the Target Group calculates Corporate Adjusted EBITDA figures for the periods indicated.

Revenue

The following table shows revenue by segment for the periods indicated.

The following table shows revenue by segment for the six month periods ended 31 December 2019, 30 June 2020, 29 December 2020, 29 June 2021 and 28 December 2021.

Online revenue split

The following table shows revenue by product type for the periods indicated for William Hill Online.

Retail revenue split

The following table shows revenue by product type for the period indicated for William Hill Retail.

Locally regulated and/or taxed vs. non-locally regulated revenue split

Locally regulated and/or taxed vs. non-locally regulated revenue split refers to the amount of revenue the Target Group derives from its locally regulated and/or taxed and non-locally regulated markets, respectively. In locally regulated and/or taxed jurisdictions, gaming duties are imposed on licensed operators. The following table shows the Target Group's locally regulated and/or taxed vs. non-locally regulated revenue split for the periods indicated.

The following table shows the Target Group's locally regulated and/or taxed vs. non-locally regulated revenue split for the six month periods ended 31 December 2019, 30 June 2020, 29 December 2020, 29 June 2021 and 28 December 2021.

Gross Profit

The following table shows gross profit by segment for the periods indicated.

Operating Profit/(loss)

The following table shows operating profit/(loss) by segment for the periods indicated.

Adjusted Operating Profit/(loss)

The Target Business uses Adjusted Operating Profit/ (loss) for the Target Business and each segment as a means to measure the profitability of the Target Business and each of its segments.

The following table shows adjusted operating profit/(loss) for the Target Group and by segment for the periods indicated.

Adjusted Operating Profit/ (loss) is calculated as net (loss)/profit for the period before finance income and expenses, excluding exceptional items and other defined adjustments (as described below) for the Target Group and each segment, respectively.

Exceptional items are those items management consider to be one-off or material in nature that should be brought to the reader's attention in understanding the Target Business's financial performance.

Adjustments are recurring items that are excluded from internal measures of underlying performance and which are not considered by the Target Business to be exceptional. This relates to the amortisation of specific intangible assets recognised in acquisitions. This item is defined as an adjustment as the Target Business believes it would impair the visibility of the underlying activities across each segment as it is not closely related to the Target Business' or any associated operational cash flows. The amortisation of specific intangible assets recognised in acquisitions is recurring and recognised over their useful life.

Certain key exceptional items and adjustments are listed below:

__________________

Notes:

(1) VAT Income: In May 2020, HMRC confirmed it would not appeal the ruling of the Upper Tier Tribunal in the cases of Rank Group Plc and Done Brothers (Cash Betting) Ltd (trading as Betfred) that VAT was incorrectly applied to revenues earned from certain gaming machines prior to 2013. The Target Business submitted claims which were substantially similar, and these claims were agreed and settled. The Target Business continues to engage with HMRC on a number of smaller related claims of an amount of GBP 1.2 million, which have not been recognised in this financial information as they are not virtually certain to be receivable. The refund, net of associated costs, was classified as an exceptional item as it is both material and one-off in nature. The net of the gross refund of VAT from HMRC and the associated third-party costs were recognised in cost of sales to match where the original charges were recognised. The interest income was recognised within finance income. After corporation tax, the net profit recognised in respect of the VAT reclaim in the period was GBP 208.3 million. This relates to the Retail segment.

(2) On-sale related costs: Following the acquisition of Target Group by the Seller on 22 April 2021, the Target Business has incurred costs associated with the on-sale to 888 Group and separation of the William Hill US segment from the Target Business. These costs are recognised as an exceptional item given their material size and one-off nature. Costs include GBP 3.4 million of technology spend to separate the platform and product so that US sports book can stand alone from the rest of the Target Business, GBP 3.0 million of redundancy costs following the separation, GBP 6.7 million of legal and consultancy costs, as well as GBP 11.4 million of employee incentive costs as part of the on-sale to 888 Group. The costs are recognised within the Corporate segment.

(3) Impairment of the Retail segment: As a result of the conclusion of the Triennial Review in 2018 and the announcement of the maximum stakes on B2 gaming products reducing to GBP 2, management recognised an impairment of the assets of the Retail segment in the year ended December 2018. This was presented as an exceptional item due to its material and one-off nature.

Subsequently in 2020, following the impact of the COVID-19 pandemic, management recognised an impairment of intangible assets of the Retail segment in December 2020.

These were presented as exceptional items due to their material nature and relate to the Retail segment.

(4) Caesars transaction related costs: The Target Business has incurred costs associated with the transaction with the Seller, which it has aggregated and presented as an exceptional item given their material size and one-off nature. Of these costs, GBP 35.9 million inclusive of VAT where applicable ( GBP 9.0 million for Target FY 2020) relates to amounts paid to financial, corporate broking and legal advice. In addition, the Target Business has incurred GBP 8.6 million (net of tax) of retention payments to key employees following the completion of the transaction to the Seller, GBP 14.3 million stamp duty charge, GBP 6.0 million of share-based payment charges and GBP 5.7 million of employee sharesave scheme costs as the Target Business delisted from the London Stock Exchange on 21 April 2021.

(5) Portfolio shop closures: During 2019 and 2020 there were two separate shop closure programmes. In 2019, 713 shops were closed as a part of the Triennial Review mitigation restructuring costs programme and in 2020 a further 119 shops were not re-opened post the first COVID-19 lockdown. As a result, during 2020 GBP 6.6 million of credit relating to the Triennial mitigation shop closures was recognised principally in relation to the negotiated early exit of certain property leases, sale of freehold properties and disposal of operations in Northern Ireland and Isle of Man. In the same period, a charge of GBP 6.2 million relating to the 2020 shop closures, being a combination of specific asset write offs (GBP 3.3 million) and provision creation (GBP 3.2 million), with a GBP 0.3 million provision release recognised.

In the Target FY 2019, GBP 47.3 million related to an impairment charge against the relevant right-of-use assets and GBP 46.6 million related to other costs of closure, onerous costs, redundancy costs and other related costs.

All portfolio shop closure costs are not presented as an exceptional item from 1 January 2020 as management do not deem these costs to be material.

(6) Regulatory provision and related fees: The industry in which the Target Business operates is subject to continuing scrutiny by regulators and other governmental authorities, which may, in certain circumstances, lead to enforcement actions, sanctions, fines and penalties or the assertion of private litigations, claims and damages. As discussed above in the Risk Factor paragraph entitled "The business of the Enlarged Group may be exposed to litigation proceedings and regulatory and compliance risks in various jurisdictions across the world" in the section of this Appendix titled "Risk Factors", following a periodic compliance assessment undertaken by the UKGC in July and August 2021 the Target Business is currently addressing action points raised by the UKGC. In that context it has made a provision of GBP 15.0 million to cover the potential for any regulatory fine, penalty or settlement and associated costs resulting from that compliance assessment as well as a further GBP 0.2 million legal fees charged in the period. This provision is the Business's best estimate based on the action points raised to date by the UKGC, management's current knowledge and third party regulatory and legal advice reflecting outcomes of previous compliance assessments and regulatory action across the industry.

(7) Costs in respect of refinancing: On 22 April 2021, the Target Business' committed revolving credit facilities of GBP 425 million provided by a syndicate of banks, expiring in November 2022 (GBP 35 million) and October 2023 (GBP 390 million) were cancelled as part of the acquisition of William Hill Limited (formerly William Hill plc) by the Seller. As a result, GBP 2.0 million was charged as an exceptional finance cost to profit and loss, being accelerated amortisation of finance fees associated with the facilities which were being amortised over the lives of each facility.

(8) Other: The Other category combines several items that were previously disclosed separately and all relating to items that were presented as exceptional items in previous financial reporting periods. From 1 January 2020, these items have not been included as exceptional items as management no longer deem these costs to be individually material.

In FY 2019, the other category includes GBP 3.5 million related to a transformation programme restructuring costs, GBP 8.2 million mainly related to corporate transaction and integration costs associated with the acquisition of Mr Green, GBP 6.0 million represented other business-wide costs relating to the Triennial Review mitigation programme aside from shop closure related costs and GBP 5.2 million of this relates to dual running costs from moving the Target Business' land-based data centres into the cloud. This is offset by GBP 1.2 million credits relating to historical shop closure exits before the Triennial Review.

Adjusted Operating Profit/(loss) and the related measures by segment are non-IFRS measures and should not be considered in isolation or as a substitute for analysis of the Target Business' operating results as reported under IFRS. Not all companies calculate Adjusted Operating Profit/(loss) measures in an identical manner and therefore it may not be comparable to other similarly titled measures used by other companies and may have limitations as an analytical tool.

EBITDA of the Enlarged Group and Adjusted EBITDA of the Enlarged Group

The 888 Group uses EBITDA and Adjusted EBITDA as a means to measure the profitability of its business. It calculates EBITDA as net profit/(loss) for the period adjusted for interest, taxes, depreciation and amortisation and Adjusted EBITDA as EBITDA adjusted for certain exceptional items, share based payments, foreign exchange differences and share of post-tax loss of equity accounted associate. It calculates EBITDA of the Enlarged Group and Adjusted EBITDA of the Enlarged Group on the same basis.

The adjustments from net profit/(loss) for the year to the EBITDA of the Enlarged Group and Adjusted EBITDA of the Enlarged Group are consistent with the Unaudited Pro Forma Financial Information of the Enlarged Group, which illustrates the effect of the (i) Placing, (ii) the proposed financing arrangements under the Senior Facilities Agreement to part-fund the Proposed Acquisition and (iii) Proposed Acquisition on the FY 2021 consolidated income statement of the 888 Group as if these transactions had taken place on 1 January 2021. The following table shows a reconciliation of net profit/(loss) for the year of the Enlarged Group to EBITDA of the Enlarged Group and Adjusted EBITDA of the Enlarged Group for FY 2021:

The unaudited pro forma financial information is for illustrative purposes only. Because of its nature, the pro forma financial information addresses a hypothetical situation and, therefore, does not represent the 888 Group's, or the Enlarged Group's actual financial position.

The unaudited pro forma financial information does not purport to represent what the 888 Group's or the Enlarged Group's financial position or results would have been if the Proposed Acquisition had taken place on the dates indicated nor does it purport to represent the 888 Group's or the Enlarged Group's results expected to be achieved in the future.

KEY FACTORS AFFECTING THE TARGET BUSINESS' RESULTS OF OPERATIONS AND FINANCIAL CONDITION

Macroeconomic environment and impact of COVID-19

Similar to the 888 Group, the Target Group has experienced an impact to its business, financial condition and results of operations as a consequence of COVID-19 and the macroeconomic environment. However, certain of these macroeconomic and COVID-19 impacts had a more pronounced and different impact on the Target Group's business as a result of its retail operations. Given the LBO portfolio of William Hill Retail, the operations and profitability of the land-based betting and gaming segments of the Target Business have been, and may continue to be, impacted by the long-term structural shift away from retail to online gambling. For Target FY 2020 and Target FY 2021, the shift to online gambling was accelerated as a result of the COVID-19 pandemic due to social distancing restrictions, public gathering restrictions and lockdown restrictions that were introduced in the UK and elsewhere in response to the COVID-19 pandemic. In addition to accelerating the shift toward online gambling, government mandated closures of non-essential stores in response to the COVID-19 pandemic impacted the Target Group's results of operations as the William Hill Retail business was unable to produce revenue for significant periods of Target FY 2020 and for the first half of Target FY 2021, while the fixed cost base, including leases and employee salaries, remained. The impact of store closures was partially offset by increased revenues from the Online business, as customers transitioned to online betting due to the temporary closure of retail shops. During FY 2020, the substitution effect in favour of the Online business was less pronounced-as many sporting events were cancelled during this period due to COVID-19 related restrictions; however, the substitution effect from retail to online gambling was more pronounced during Target FY 2021, as many sporting events were not cancelled during this period despite certain restrictions on non-essential businesses remaining in place in many jurisdictions during portions of the year. The impacts of COVID-19 to William Hill Retail were minimal in the second half of Target FY 2021, albeit with some disruption as a result of new masking requirements and reduced foot traffic following the outbreak of the Omicron variant.

Despite the macroeconomic impact of COVID-19 and related restrictions, the Target Business results were resilient. See the paragraphs above titled "Target Adjusted EBITDA", "Revenue", "Gross Profit" and "Adjusted Operating Profit" above for the Target Adjusted EBITDA, revenue, gross profit and operating profit by segment for the Target Business for the six and twelve month periods, as applicable, indicated and beginning with December 31, 2019, which was the last semi-annual period not impacted by COVID-19. In addition, Target Retail Adjusted EBITDA and revenue for William Hill Retail for the six months ended 28 December 2021 were GBP 48.1 million and GBP 249.5 million, respectively. Although there were minimal impacts following the outbreak of the Omicron variant in the fall of 2021, the Company believes trading in this second half of 2021 is largely representative of the underlying trading performance of retail shops across a period when LBOs were open with no lockdown restrictions from COVID-19 and sporting events were being played on a regular basis.

Betting and gaming industry trends and new product offerings

Similar to the 888 Group, the Target Group has experienced an impact to its business, financial condition and results of operations as a result of betting and gaming industry trends. Since emerging in the mid-1990s, the online gaming industry has continued to grow, bolstered by technological developments, expansion of mobile access and increased penetration of high-speed internet. Regulus Partners estimates that the total revenue in the EMEA online gambling market during 2020 was EUR 31.0 billion, which represents a relatively consistent compound annual growth rate of 19 per cent. since 2014. For a further discussion of the online gambling market, see paragraph 2 of the section of this Appendix titled "Industry and Regulatory Overview".

As with the shift from in-person retail gambling to online gambling in the EMEA, the UK has also seen a gradual shift toward online gambling. In particular, following the Triennial Review, and in light of policies adopted in response to the COVID-19 pandemic, the number of overall betting shops have fallen from a peak of over 9,000 in 2014 to approximately 6,500 as of September 2020. 888 management believe that the shift toward online betting was more pronounced during 2020 and parts of 2021 due to the closure of non-essential shops in response to COVID-19, however, the UK is highly mature in terms of digital adoption and the sustained impact from these pandemic-response policies is anticipated to be limited. According to Regulus Partners, the UK online gambling market is expected to have a compound annual growth rate of 4.9 per cent. between 2019-2026 (estimated) demonstrating that the medium term trend will be more limited than during the pandemic impacted years 2020 and 2021.

Changes in gaming and betting regulation, gaming taxes and duties

Similar to the 888 Group, the Target Group operates in a complex regulatory environment, in particular with respect to its betting and gaming operations, which is subject to continuous evolution.

Regulation

The Target Group is regulated by certain authorities and has licensed entities in the UK, Gibraltar and Malta. Additional service functions of the Target Business are located in Bulgaria, Poland, Italy, Spain and the Philippines. As a result of the retail and LBO portfolio of William Hill Retail, the Target Business is also subject to additional regulations that are not applicable to, or less impactful on, the 888 Group. Changes to such gaming and betting laws and regulations or licensing regimes could require the Target Business to make changes in its operations, suspend or limit services in certain jurisdictions and have a material adverse effect on its business, financial condition and results of operations. For example, with effect from April 2019, new regulations were introduced in the UK under the Triennial Review reducing the staking limits on B2 gaming products from GBP 100 to GBP 2. This reduced the revenues within the William Hill Retail portfolio and resulted in the Target Group permanently closing 713 LBOs during Target FY 2019. Coupled with the additional 119 LBOs the Target Business chose to permanently close during FY 2020 as a result of the impact of COVID-19, it is estimated that the closure of these LBOs resulted in an approximate GBP 83.0 million impact on the Target Adjusted EBITDA of William Hill Retail. See also the risk titled "The LBOs operated by William Hill Retail will subject the Enlarged Group to additional regulation that does not apply to the current operations of the 888 Group" in the section of this Appendix titled "Risk Factors".

In addition, the International Online business has been impacted by regulatory changes in particular in Germany and to a lesser extent in the Netherlands. During 2021, the International Online business experienced significant negative impact from the regularisation of the German and Dutch markets. The German market was regularised late in 2020 and the Target Business applied for three new licences that are still pending to date. Until the licences are granted, the Target Business is unable to launch campaigns, pay bonuses or engage in marketing in the German market which restricts its ability to acquire and retain customers.

The Dutch market became a regulated market on 1 October 2021. The Target Business pulled out of the Dutch market until a new licence is obtained.

See the section of this Appendix titled "Industry and Regulatory Overview" for additional detail on the regulations to which the Target Business is subject.

Taxes

The Target Group is subject to various taxes and levies in various jurisdictions, and changes in tax legislation or the application or interpretation of tax legislation may affect its results of operations. In particular, VAT and betting taxes affected its results of operations during the period under review.

In particular, the Target Group is subject to significant taxation and levies in the UK, including the following:

· a general betting duty of 15 per cent. on gross betting profits (stakes received less winnings paid out) earned in its LBOs in the UK;

· Remote Gaming Duty of 21 per cent. (increased from 15 per cent. for accounting periods that begin on or after 1 April 2019) on its remote gaming (online and telephone) revenues derived from UK customers;

· Machine Games Duty payable at 20 per cent. of the revenue from gaming machines in its LBOs;

· the Horserace Betting Levy, a statutory levy on bets struck in the UK on horse races held in the UK; and

· significant irrevocable VAT, leading to increases in the Target Group's cost base.

EXPLANATION OF KEY LINE ITEMS

Revenue

Revenue is measured at the fair value of the consideration received or receivable from customers and represents amounts receivable for goods and services that the Target Business is in business to provide, net of discounts, marketing inducements and VAT. It is comprised of revenue, other operating income and finance income.

From FY 2019 and subsequent periods, after implementation of IFRS 15 'Revenue from contracts with customers; and IFRS 9 'Financial Instruments', revenue has been treated as a derivative under IFRS 9 'Financial Instruments' and is not treated as revenue under IFRS 15 'Revenue from Contracts with Customers'.

In the case of LBOs (including gaming machines), William Hill Online's sportsbook and telebetting and William Hill Online's casino (including games on William Hill Online's arcade and other numbers bets) revenue represents gains and losses from gambling activity in the period. Open positions are carried at fair value, and gains and losses arising on this valuation are recognised in revenue, as well as gains and losses realised on positions that have closed.

Revenue from William Hill Online's poker business is within the scope of IFRS 15 'Revenue from Contracts with Customers' and reflects the net income (rake) earned when a poker game is completed, which is when the performance obligation is deemed to be satisfied.

Gaming duties

Gaming duties include the duties and taxes imposed by regulators on licensed operators in jurisdictions in which betting and gaming is regulated.

Other cost of sales

Cost of sales primarily include profit sharing with third-party providers of sports and gaming content. In addition, in connection with the VAT Reclaim (as defined below), the net of the gross refund of VAT from HMRC and the associated third-party costs have been recognised in cost of sales to match where the original charges were recognised.

In May 2020, HMRC confirmed it would not appeal the ruling of the Upper Tier Tribunal in the third-party cases of Rank Group Plc and Done Brothers (Cash Betting) Ltd (trading as Betfred) that VAT was incorrectly applied to revenues earned from certain gaming machines prior to 2013. The Target submitted a number of claims which were substantially similar, some of which have been settled and resulted in VAT refunds. The Target continues to engage with HMRC on a number of smaller related claims, which have not been recognised in the Target Business Historical Financial Information as they are not virtually certain to be receivable (collectively, the "VAT Reclaim"). The refund, net of associated costs, has been classified as an exceptional item as it is both material and one-off in nature. The net of the gross refund of VAT from HMRC and the associated third-party costs have been recognised in cost of sales to match where the original charges were recognised.

Marketing expenses

Marketing expenses primarily include advertising and promotional expenses. The Target Group undertakes both "online" and "offline" marketing to promote its brand and products to customers. Offline marketing typically involves television based advertising and online marketing involves a number of internet based marketing methods.

Operating expenses

Operating expenses primarily relate to the costs of operating the business, including staff costs, depreciation, amortisation and property related costs, as well as certain exceptional operating expenses. Exceptional operating expenses include the impairment of the retail segment, transaction related costs, portfolio shop closures, amortisation of acquired intangibles and other, which includes costs such as dual running costs from moving the Target's land-based data centres into the cloud, costs related to corporate transaction and integration costs associated with the acquisition of Mr Green in 2019 and transformation restructuring costs.

Other operating income

Other operating income mostly represents rents receivable on properties let by the Target Business, bookmaking software licensing income and brand licensing income.

Finance income

Finance income is comprised of interest on cash and cash equivalents, interest on net pension scheme assets or liabilities and finance income in respect of the VAT Reclaim. Interest income is included within finance income and is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable.

Finance expenses

Finance expenses include interest payable and similar charges on bank loans, bonds and overdrafts, the amortisation of capitalised borrowing, interest on lease liabilities and exceptional finance expenses related to costs in respect of a refinancing in Target FY 2021. Finance expenses include the amortisation of fees that are an integral part of the effective finance cost of a financial instrument, including issue costs, and the amortisation of any other differences between the amount initially recognised and the redemption price.

Share of post-tax profit /(loss) of equity accounted associate

Share of results of post-tax profit /(loss) of equity accounted associates represents the Target Business' share of the results of Sports Information Services (Holdings) Limited, Lucky Choice Limited and 49s Limited (which was disposed in Target FY 2020).

At 28 December 2021, William Hill Organization Limited, a principal subsidiary of the Target Group, held an investment of 19.5 per cent. (31 December: 2019 19.5 per cent.; 29 December 2020: 19.5 per cent.) of the ordinary share capital of Sports Information Services (Holdings) Limited, a company incorporated in Great Britain. The Target Group uses the equity method of accounting for Sports Information Services (Holdings) Limited.

At 28 December 2021, William Hill Organization Limited held, directly or indirectly, an investment of 33 per cent. (31 December 2019: 33 per cent.; 29 December 2020: 33 per cent.) of the entire share capital of Lucky Choice Limited. The results of this company are not material to the results of the business and the investment in Lucky Choice Limited has been stated at cost and has not been accounted for under the equity method.

As at 31 December 2019, William Hill Organization Limited held 33 per cent. Of 49s Limited but during the period ending 29 December 2020, the Target Business sold its entire shareholding in 49s Limited for proceeds of GBP 2.0 million.

Taxation

Tax expense represents the sum of the tax currently payable and deferred tax.

The tax currently payable is based on taxable profit for the period. It is comprised of the UK corporation tax, the overseas tax and adjustments in respect of prior periods. Taxable profit differs from net profit as reported in the income statement because it excludes items of income or expense that are taxable or deductible in other periods, and it further excludes items that are never taxable or deductible. The Target Group's liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the period end date.

Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit and is accounted for using the liability method.

Net (loss)/profit for the period attributable to net parent investment

As the Target Group is not a separate legal group and has not previously prepared standalone financial statements, it does not believe it is meaningful to disclose share capital or an analysis of reserves. The net assets of the Target Group are represented by the cumulative investment of the Seller in the Target Business and disclosed as net parent investment.

Net (loss)/profit for the period attributable to non-controlling interests

Represents share of results attributable to non-controlling interests primarily relating to operations in Latvia and Columbia.

Exceptional items and adjustments

Exceptional items are those items management consider to be one-off or material in nature that should be brought to the reader's attention in understanding the Target Business's financial performance. The classification of exceptional and adjusting items requires significant management judgement after considering the nature and materiality of a transaction. The Target Business's definitions of exceptional and adjusting items are outlined within the Target Business's accounting policies. Note 3 to the Target Business Historical Financial Information further details the exceptional and adjusting items and their adherence to the Target Business's policies.

RESULTS OF OPERATIONS

Comparison of results of operations for Target FY 2021 and Target FY 2020

The following table sets forth certain income statement data for Target FY 2020 and Target FY 2021.

Revenue

During Target FY 2021, the Target Business' revenue increased by GBP 84.4 million, or 7.3 per cent., to GBP 1,241.4 million from GBP 1,157.0 million for Target FY 2020. This increase was primarily due to growth in the UK Online business and more sporting events caused by the COVID-19 pandemic cancellations in Target FY 2020 which in turn drove bigger Online staking numbers in Target FY 2021 than in the corresponding period in Target FY 2020.

Gaming duties

During Target FY 2021, the Target's gaming duties increased by GBP 46.2 million, or 24.2 per cent., to GBP 237.1 million from GBP 190.9 million for Target FY 2020. This increase was primarily due to increased cost of sales as a result of increased revenue, specifically impacted by the mix of revenue by division with more weighted toward UK Online, which pays higher rates of gaming duties, due to COVID-19.

Other cost of sales

During Target FY 2021, the Target's other cost of sales increased by GBP 249.1 million to a cost of GBP 126.3 million from positive GBP 122.8 million for Target FY 2020. This increase was primarily due to exceptional costs of sales of positive GBP 238.3 million related to the VAT Reclaim in Target FY 2020. The net gross refund of VAT from HMRC and the associated third-party costs were recognised as cost of sales to match where the original charge was located.

Marketing expenses

During Target FY 2021, the Target's marketing expenses increased by GBP 21.1 million, or 10.7 per cent, to GBP 217.4 million from GBP 196.3 million for Target FY 2020. This increase was primarily due to increased revenues coupled with major sporting events which took place in Target FY 2021 such as Euro 2020 that did not take place in Target FY 2020.

Operating expenses

During Target FY 2021, the Target's operating expenses increased by GBP 6.6 million, or 0.9 per cent., to GBP 772.4 million from GBP 765.8 million for Target FY 2020, showing a broadly consistent cost base year-on-year. Exceptional operating expenses for the Target FY 2021 and Target FY 2020 were GBP 165.5 million and GBP 147.2 million, respectively. In Target FY 2021, these exceptional operating expenses were primarily related to GBP 70.5 million of costs related the acquisition of William Hill Limited by the Seller and GBP 24.5 million of costs associated with the on-sale and separation of the William Hill US segment from the Target Business to prepare the Target Business for sale. In Target FY 2020, these exceptional operating expenses were primarily related to an impairment of GBP 125.7 million that was recognised in the William Hill Retail segment following the impact of the COVID-19 pandemic, as well as a change in the useful economic life of the Retail licences intangible asset.

Other operating income

During Target FY 2021, the Target's other operating income increased by GBP 0.5 million, or 13.2 per cent., to GBP 4.3 million from GBP 3.8 million for Target FY 2020.

Finance income

During Target FY 2021, the Target's finance income decreased by GBP 20.8 million, or 92.4 per cent., to GBP 1.7 million from GBP 22.5 million for Target FY 2020. This decrease was primarily due to finance income in respect of the VAT Reclaim of GBP 18.9 million in Target FY 2020, which was classified as an exceptional item.

Finance expenses

During Target FY 2021, the Target's finance expenses increased by GBP 19.9 million, or 39.4 per cent., to GBP 70.4 million from GBP 50.5 million for Target FY 2020. This increase was primarily due to higher finance expenses on bank loans, bonds and overdrafts in Target FY 2021 as compared to Target FY 2020. In addition, on 22 April 2021, the Target Business cancelled certain of its former committed revolving credit facilities as part of the acquisition of William Hill PLC by Caesars Entertainment Inc. As a result, GBP 2.0 million was charged as an exceptional finance expense, related to accelerated amortisation of finance fees associated with the facilities which were being amortised over the lives of each facility.

Share of post-tax profit / (loss) of equity accounted associates

During Target FY 2021, the Target's share of post-tax loss of equity accounted associates increased by GBP 0.8 million to nil from a loss of GBP 0.8 million for Target FY 2020. This increase was primarily due to no profit or loss by Sports Information Services (Holdings) Limited in Target FY 2021 as compared to losses in Target FY 2020.

Taxation

During Target FY 2021, the Target's taxes decreased by GBP 28.8 million to a credit of GBP 15.2 million from a charge of GBP 13.6 million for Target FY 2020. This decrease was primarily due to a decrease in the tax on the exceptional items described above, with taxes on exceptional items and adjustments decreasing from GBP 24.6 million in FY 2020 to GBP 8.0 million in FY 2021.

(Loss)/profit for the period attributable to non-controlling interests

During Target FY 2021, profit for the period attributable to non-controlling interests increased GBP 0.5 million to GBP 0.7 million from GBP 0.2 million for Target FY 2020 as a result of improved financial performance in Latvia.

Comparison of results of operations for Target FY 2020 and Target FY 2019

The following table sets forth certain income statement data for Target FY 2020 and Target FY 2019.

Revenue

During Target FY 2020, the Target Group's revenue decreased by GBP 298.3 million, or 20.5 per cent., to GBP 1,157.0 million from GBP 1,455.3 million for Target FY 2019. This decrease was primarily due to a decrease of GBP 362.8 million in William Hill Retail revenue to GBP 354.2 million in Target FY 2020 from GBP 717.0 million in Target FY 2019 driven by the reduction in retail activities as a result of the COVID-19 pandemic. The Target Group experienced an increase in UK Online revenue of GBP 22.3 million from GBP 480.9 million in Target FY 2019 to GBP 503.2 million in Target FY 2020 and an increase in International Online revenue of GBP 42.2 million from GBP 257.4 million in Target FY 2019 to GBP 299.6 million in Target FY 2020.

Gaming duties

During Target FY 2020, the Target Group's gaming duties decreased by GBP 23.9 million, or 11.1 per cent., to GBP 190.9 million from GBP 214.8 million for Target FY 2019. This decrease was primarily due to decreased revenues partially offset by increases in the UK Remote Gaming Duty to 21 per cent. from 1 April 2019.

Other cost of sales

During Target FY 2020, the Target Group's other cost of sales decreased by GBP 272.5 million to positive GBP 122.8 million from a cost of GBP 149.7 million for Target FY 2019. This decrease was primarily due to exceptional costs of sales of positive GBP 238.3 million related to the VAT Reclaim. The net gross refund of VAT from HMRC and the associated third-party costs were recognised as cost of sales to match where the original charge was located 

Marketing expenses

During Target FY 2020, the Target Group's other marketing expenses increased by GBP 9.1 million, or 4.9 per cent., to GBP 196.3 million from GBP 187.2 million for Target FY 2019. This increase was primarily due to increased marketing to drive growth in the International Online business.

Operating expenses

During Target FY 2020, the Target Group's operating expenses decreased by GBP 127.1 million, or 14.2 per cent., to GBP 765.8 million from GBP 892.9 million for Target FY 2019. This decrease was primarily due to shop closures and resizing of the retail estate in Target FY 2019 and Target FY 2020, including the related reduction of staff and associated costs. Exceptional operating expenses for the Target FY 2020 and Target FY 2019 were GBP (147.2) million and GBP (126.9) million, respectively, and were primarily related to an impairment of the William Hill Retail segment following the impact of the COVID-19 pandemic in Target FY 2020 and costs related to the closure of 713 shops in Target FY Target 2019.

Other operating income

During Target FY 2020, the Target Group's other operating income decreased by GBP 1.7 million, or 30.9 per cent., to GBP 3.8 million from GBP 5.5 million for Target FY 2019.

Finance income

During Target FY 2020, the Target Group's finance income increased by GBP 19.5 million to GBP 22.5 million from GBP 3.0 million for Target FY 2019. This increase was primarily due to finance income in respect of the VAT reclaim of GBP 18.9 million recognised in the Target FY 2020, which was considered exceptional finance income.

Finance expenses

During Target FY 2020, the Target Group's finance expenses decreased by GBP 2.2 million, or 4.2 per cent., to GBP 50.5 million from GBP 52.7 million for Target FY 2019. This decrease was primarily due to slight decreases in finance expenses on bank loans, bonds and overdrafts in Target FY 2020.

Share of post-tax (loss)/profit of equity accounted associates

During Target FY 2020, the Target Group's share of post-tax (loss)/profit of equity accounted associates decreased by GBP 2.3 million to a loss of GBP 0.8 million from a profit of GBP 1.5 million for Target FY 2019. This decrease was primarily due to decreased profit due to the impact of the COVID-19 pandemic by Sports Information Services (Holdings) Limited in the Target FY 2020 as compared to Target FY 2019.

Taxation

During Target FY 2020, the Target's taxes increased by GBP 22.3 million to a charge of GBP 13.6 million from a credit of GBP 8.7 million for Target FY 2019. This increase was primarily due to an increase in the UK corporation tax from GBP 3.1 million in Target FY 2019 to GBP 25.8 million in Target FY 2020, which includes a tax charge on exceptional items of GBP 24.6 million in Target FY 2020 compared to a tax credit on exceptional items of GBP 11.5 million in Target FY 2019, and an increase in the deferred tax credit from GBP 15.1 million in Target FY 2019 to a deferred tax credit of GBP 25.7 million in Target FY 2020.

LIQUIDITY, CAPITAL RESOURCES AND FUNDING STRUCTURE

The Target Business, and in particular William Hill Retail when it is open and trading without restrictions, is highly cash generative, typically converting a high proportion of profits into net cash from operating activities. The Target Business' principal sources of funds have been cash generated from its operating activities and borrowings under the Existing 2023 Notes and the Existing 2026 Notes. The Target Group's principal uses of cash were to fund capital expenditures, working capital and debt service obligations. As of 28 December 2021, the Target had cash and cash equivalents of GBP 203.7 million. Following the Proposed Acquisition, the Target Group's financing requirements will be part of the financing requirements for the Enlarged Group, however, actual financing requirements will depend on a number of factors, some of which may be beyond their control. For further details, see the section of this Appendix titled "Risk Factors".

The table below sets forth a summary of the Target Group's consolidated statements of cash flows for the periods indicated:

Cash flows from operating activities

Net cash flows from operating activities decreased by GBP 283.8 million, or 91.1 per cent., from GBP 311.6 million for Target FY 2020 to GBP 27.8 million for Target FY 2021. This decrease was primarily attributable to the VAT refund from HMRC received in Target FY 2020.

Net cash flows from operating activities increased by GBP 206.0 million from GBP 105.6 million for Target FY 2019 to GBP 311.6 million for Target FY 2020. This increase was primarily attributable to the VAT refund from HMRC received in Target FY 2020.

Cash flows used in investing activities

Net cash flows used in investing activities increased by GBP 2,878.7 million from GBP 42.3 million for Target FY 2020 to GBP 2,921.0 million for Target FY 2021. This increase was primarily attributable to the acquisition of William Hill Limited (formerly William Hill plc) in connection with the Caesars Acquisition.

Net cash flows used in investing activities decreased by GBP 176.3 million, or 80.6 per cent., from GBP 218.6 million for Target FY 2019 to GBP 42.3 million for Target FY 2020. This decrease was primarily attributable to the acquisition of Mr Green in Target FY 2019.

Cash flows (used in)/from financing activities

Net cash flows from/used in financing activities increased by GBP 2,569.2 million from GBP 53.9 million used for Target FY 2020 to GBP 2,515.3 million from financing activities for Target FY 2021. This increase was primarily attributable to the financing used to fund the acquisition of William Hill Limited (formerly William Hill plc) by the Seller as part of the Caesars Acquisition.

Net cash flows from/used in financing activities decreased by GBP 87.9 million from GBP 34.0 million from financing activities for Target FY 2019 to GBP 53.9 million used in financing activities for Target FY 2020. This decrease was primarily attributable to the repayment of unsecured notes in Target FY 2020, partially offset by an equity placement.

CAPITAL EXPENDITURE

The following table shows the Target's capital expenditures for the periods indicated and divided between William Hill Online (which is comprised of the UK Online and International Online segments), William Hill Retail and Corporate capital expenditures:

__________________

Notes:

(1) Corporate capital expenditures consist of capital expenditures related to head office systems.

Net capital expenditures for Target FY 2021 were GBP 77.3 million. The capital expenditures in Target FY 2021 were primarily related to investments in the proprietary 'Unity' platform. The Unity platform and 'MTT' user interface are ongoing developments at the Target Group that use modular technology to unify customer data, empower markets to personalize customer experiences and leverage standardized operating procedures for scaling new markets. Unity is a wholly-owned and operated William Hill backend that includes account management, betting engine, and existing trading technology. The MTT user interface further allows the Target Group to drive product improvements in days, experiment with new features, access to real-time streams for usage, customer transactions and compliance, and grants back-office for front-end to control CMS integration, bonusing and layout for streamlined operations.

Net capital expenditures for Target FY 2020 were GBP 55.8 million. The capital expenditures in Target FY 2020 were primarily related to the continued investment in product and technology during the year despite the impact of COVID-19 on the business leading to a reduction in spend in the William Hill Retail business.

Net capital expenditures for Target FY 2019 were GBP 66.4 million. The significant capital expenditures in Target FY 2019 included investments in new sportsbook front-end and single wallet in Spain.

OFF BALANCE SHEET ARRANGEMENTS AND CONTINGENT LIABILITIES

As of 28 December 2021, the Target Group did not have any off balance sheet arrangements.

The Target Group has disclosed a contingent liability surrounding legal claims from consumers relating to the provision of gambling services in a number of (principally continental European) jurisdictions. The claims allege either failure to follow responsible gambling procedures, breach of licence conditions or that underlying contracts in question (in which consumers contractually agree to the terms and conditions of play, which are subject to the laws of Gibraltar or Malta) are null and void given local licensing regimes. The Target Group also noted a key source of estimation uncertainty in providing an estimate of the financial effect of these claims being a potential outflow of economic benefits of up to GBP 45.0 million, which is an increase to the estimation as at 29 December 2020 recognising the increase in claims trends during Target FY 2021.

Separately a provision of GBP 1.2 million is held at 28 December 2021 for claims in separate jurisdictions, where the likelihood of an outcome in favour of the consumers in question is considered probable.

The Target Group has a contingent liability reflecting certain payments, including employee retention scheme payments, which will be payable upon Completion of the Proposed Acquisition.

CONTRACTUAL OBLIGATIONS

The following table sets forth the Target Group's contractual obligations as of 28 December 2021:

QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK

Liquidity risk

Liquidity risk is the risk that the Target Group has insufficient funds available to settle its liabilities as they fall due. The Target Business generates strong operating cash flows and the Target aims to maintain sufficient cash balances to meet its anticipated working capital requirements based on regularly updated cash flow forecasts. Liquidity requirements that cannot be met from operational cash flow or existing cash resources would previously have been satisfied by its overdraft facilities and facilities provided by the Seller.

Capital management and financing risk

The Target Group seeks to maintain an appropriate capital structure which enables it to continue as a going concern, supports its business strategy and takes into account the wider economic environment. The Target Group's capital comprises net parent investment and debt finance, and these elements are managed to balance the requirements of the business and the interests of debt providers. The Target Group manages its capital structure through cash flows from operations and the raising or repayment of debt and the receipt of contributions through net parent investment.

Financing risk is the risk that the Target Group is unable to access sufficient finance to refinance its debt obligations as they fall due. The Target manages this risk by maintaining a balance between different funding sources including net parent investment and debt. It seeks to mitigate its debt financing risk by diversifying its sources of debt capital. The bank loan and sterling corporate bond markets are currently used for this purpose. The Target Group also seeks to mitigate its refinancing risk by having an appropriately balanced debt maturity profile.

Credit risk

The Target Group is exposed to credit risk from counterparties defaulting on their obligations, resulting in financial loss to the Target Group. It arises in relation to transactions with commercial counterparties and financial institutions. It also arises from customers who have been granted access to credit facilities.

The Target Group manages its counterparty risk by closely monitoring and, where appropriate, limiting the amount that can be deposited or accumulated with any one counterparty. The Target Group will only deposit funds with pre-approved financial institutions with specified minimum credit ratings or strong balance sheet. The Target Group's policy is to mitigate its credit risk with respect to derivative transactions by using a number of different counterparties for material transactions.

Interest rate risk

Interest rate risk arises from the Target Group's borrowings. Protecting earnings from rising interest rates is predominantly achieved by fixing the interest costs on a significant proportion of the Target Group's debt.

Current treasury policy stipulates that at least 70 per cent. of the Target Group's debt should be at fixed rates. At 28 December 2021, all of the Target Group's borrowings were at fixed rates.

The Target Group also earns finance income from deposits placed with certain approved financial institutions. Based on the level of variable interest-bearing deposits and borrowing facilities as at Target FY 2021, a 100 basis points change in interest rates would have the following impact on the Target financial statements:

Currency risk

The Target Group earns revenues in foreign currencies other than pound sterling, primarily euros, which exposes it to foreign exchange risk. The Target Group mitigates this risk by incurring costs in currencies matching its revenues. Any remaining transactional foreign currency exposure is not considered to be material and is not hedged. Material individual foreign currency transaction exposures are considered for hedging on an ad hoc basis. The Target Business does not use derivative financial instruments for speculative purposes.

As at 28 December 2021, the Target Group had no derivative contracts for currency hedging purposes (29 December 2020: nil; 31 December 2019: nil). The Target is also exposed to foreign currency accounting translation risk on the earnings and net assets of its overseas operations which are denominated in foreign currencies. The Target does not hedge such translation risk.

In Target FY 2021, a 5 per cent. weakening in the euro would have reduced profit before interest and tax by GBP 0.2 million and net assets by GBP 14.0 million.

Pensions risk

The Target Group operates defined benefit and defined contribution pension schemes for its employees. Pensions risk arises in respect of the defined benefit scheme where the cost of funding retirement benefits ultimately falls upon the Target Group. The last triennial actuarial valuation as at 30 September 2019 showed a funding surplus on the defined benefit scheme of GBP 23.6 million. The Target Group agreed to pay GBP 1.9 million per annum in respect of the costs of insured death benefits, expenses and levies until September 2025.

During the period ended 28 December 2021, the Target Group agreed a buy-in of the scheme's liabilities. On 28 June 2021, a transaction was completed which insured the liabilities of the scheme with Rothesay Life. As a result of the transaction, the scheme holds annuities with Rothesay Life which are qualifying insurance policies as defined in IAS 19.8 'Employee benefits'. The income from these policies exactly matches the amount and timing of all benefits to those members covered under the policies.

Through the scheme, following the buy-in, the only risk that the Target Group has is counterparty risk with the Insurance company backing the policies.

CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY

In the application of the Target Group's accounting policies, the Target Group is required to make judgements, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an on-going basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period or in the period of the revision and future periods if the revision affects both current and future periods.

Critical accounting judgements

Deal perimeter

The legal entities that comprise the Target Group are set out in note 35 to the Target Business Historical Financial Information set out in Appendix 3 to this announcement. Certain investments in associates, NeoGames S.a.r.l and Green Jade Games Limited, were transferred (or are in the process of being transferred) from the deal perimeter to Caesars during the period to 28 December 2021. As these do not represent activities of the Target Group, the results for these investments in associates have been excluded from the Target Business Historical Financial Information for all reporting periods presented.

Exceptional items and adjustments

The Target Group separately reports exceptional items and adjustments in order to calculate adjusted results, as it believes these measures provide additional useful information on underlying performance and trends to management, together with an understanding of the effect of non-recurring or large individual items upon the overall profitability of the Target Group.

The classification of exceptional and adjusting items requires significant management judgement after considering the nature and materiality of a transaction. The Target Group's definitions of exceptional and adjusting items are outlined within the Target Group accounting policies.

Where there are individually material items that have not been presented as exceptional items, the nature and amount of these items have been separately disclosed within the Target Business Historical Financial Information where relevant.

IFRS 16 'Leases'

IFRS 16 'Leases' replaced IAS 17 'Leases' in its entirety in the period ended 31 December 2019. Management of the Target Group addressed the key judgements, including the assessment of the lease term at the point where the lessee can be reasonably certain of its right to use the underlying asset.

Across the William Hill Retail estate, the Target Group has recognised a lease liability of GBP 121.3 million at 31 December 2019, GBP 93.9 million at 29 December 2020, and GBP 95.1 million at 28 December 2021. The William Hill Retail estate has experienced regulatory change with the implementation of the GBP 2 stake limit on B2 gaming products on 1 April 2019 leading to the Target Group deciding to close 713 shops in the third quarter of 2019, followed by the COVID-19 pandemic, which led to the Target Group deciding to close a further 119 shops in 2020. Given these closure programmes, and the continued uncertainty surrounding the William Hill Retail estate from both these external shocks to the Target Group, management determined the lease term under IFRS 16 across the William Hill Retail estate as the next available break date as this means the Target Group is not 'reasonably certain' that any lease break will not be exercised.

Contingent liabilities

The Target Group has disclosed a contingent liability surrounding legal claims from consumers relating to the provision of gambling services in a number of European jurisdictions as described in "Off balance sheet arrangements and contingent liabilities." The claims allege either failure to follow responsible gambling procedures, breach of licence conditions or that underlying contracts in question (in which consumers contractually agree to the terms and conditions of play, which are subject to the laws of Gibraltar or Malta) are null and void given local licencing regimes.

The Target Group assesses and defends individual claims as they are received both on the individual underlying factual basis and also with regard to legal advice received as to whether such jurisdictions and their local licencing regimes are incompatible with European Union law on the free movement of services. Since the last quarter of 2020, the Target Group has been subject to a particular acceleration of claims made in Austria following marketing campaigns by litigation funders in that jurisdiction. Claims have continued to be received throughout 2021 at a broadly consistent rate with a slight increase in claims early in 2021 but a small decrease across second half of 2021.

The Target Group has made a critical judgement that these claims, and future claims for services already rendered, are a contingent liability as they are only considered a possible, but not probable, legal obligation based on external legal advice received from the Target Group's lawyers (in relation to the compatibility or otherwise of the Austrian licencing regime with EU law, and in relation to other arguments about applicable law).

The Target Group also noted a key source of estimation uncertainty in providing an estimate of the financial effect of these claims being a potential outflow of economic benefits of up to the value of GBP 45.0 million as at 28 December 2021, which is an increase to the estimation as at 29 December 2020 recognising the increase in claims trends during 2021. This range was assessed based on (i) the number and individual size of claims received to date and assumptions based on such observations as can be derived from those claims at this comparatively early stage, (ii) the steps that the Target Group intends to take to defend those claims and (iii) the fact that the Target Group has been advised that any outflow would be expected to be on a net of tax basis.

Separately a provision of GBP 1.2 million is held at 28 December 2021 for claims in separate jurisdictions where an outcome in favour of the consumers in question is probable.

Mr Green valuation of intangibles

The Target Group acquired Mr Green on 28 January 2019 for GBP 244.8 million. As part of the purchase price allocation the Target Group recognised separately identifiable acquired intangibles comprising brands (GBP 83.9 million); customer relationships (GBP 12.8 million) and platform software (GBP 16.3 million). Goodwill of GBP 153.0 million was recognised on acquisition.

The Target Group exercised judgement in determining the intangible assets acquired and their fair value on the Mr Green business combination, with the support of external experts to support the valuation process, where appropriate. The judgements made were based on recognised valuation techniques such as the "relief from royalty" method for brands, recognised industry comparative data and the Target Group's industry experience and specialist knowledge.

Valuation of William Hill intangibles

On 22 April 2021, the Seller (specifically Caesars UK Holdings Limited, which is included within the deal perimeter) acquired William Hill Limited (formerly William Hill PLC) for GBP 2.9 billion. Of this GBP 2.9 billion, a critical accounting judgement has been applied to split the consideration between the Target Business proposed to be acquired by the 888 Group and included within this perimeter and the William Hill US business which will continue to be owned by Caesars Entertainment Inc. The consideration has been split based on the proposed acquisition price by the 888 Group of GBP 1.95 billion up to GBP 2.05 billion as the appropriate valuation of the Target Business as at 22 April 2021.

The consideration of GBP 1.95 billion up to GBP 2.05 billion for the Target Business has led to the recognition of separately identifiable acquired intangibles as part of the purchase price allocation of brands and an uplift in the value of computer software assets.

The Target Business exercised judgement in determining the intangible assets acquired and their fair value on the Target Business combination, with the support of external experts to support the valuation process where appropriate. The judgements made were based on recognised valuation techniques such as the "relief from royalty" method for brands and developed computer software and the Target Business's industry experience and specialist knowledge.

Key sources of estimation uncertainty

The estimates and assumptions which have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial period are discussed below.

Impairment of intangible assets with indefinite lives

Determining whether intangible assets with indefinite lives are impaired requires an estimation of the value in use of the cash-generating units to which the intangible assets have been allocated. The value in use calculation requires management to estimate the future cash flows expected to arise from the cash-generating unit and a suitable discount rate in order to calculate present value.

In 2018, the Target Group recognised an impairment of GBP 882.8 million in the William Hill Retail segment due to the reduced expected future cash flows as a result of the announcement of the GBP 2 stake limit on B2 gaming products in the William Hill Retail business. The GBP 2 stake limit was then implemented from 1 April 2019, which led to the Target Group taking the decision to close 713 shops in the third quarter of 2019.

The COVID-19 pandemic has had a further sizeable impact on the William Hill Retail business, with shops shut or under restrictions across much of 2020. As such, the Target Group recognised impairments totalling GBP 125.7 million in Target FY 2020.

As such, the William Hill Retail estate had been re-sized twice in recent years, and the industry is naturally moving away from retail space in the UK towards an online/digital presence. These factors led the Target Group to the conclusion that the value of a licence to operate a LBO / group of LBOs is depreciating over time and is not expected to hold its value indefinitely. Therefore, the Target Group decided as at 30 December 2020 to amortise the assets over a 20-year useful economic life ("UEL"). This change in UEL is an estimate that management made based on the available information. This change was made prospectively from the 52-week financial period starting 30 December 2020 and is a change in accounting estimate. The impact on the Target Business Historical Financial Information is an increased amortisation charge of GBP 3.3 million until the acquisition by the Seller on 22 April 2021, at which point this balance was subsumed into goodwill.

Retirement benefit costs

The determination of the pension cost and defined benefit obligation of the Target Business' defined benefit pension scheme depends on the selection of certain assumptions which include discount rate, inflation rate and mortality assumptions. Differences arising from actual experience or future changes in assumptions are reflected in subsequent periods. During Target FY 2021, the Target Business performed a pension buy-in, as such, although the gross obligation may fluctuate, this does not change the net position for the Target Business. This is therefore not deemed as a key source of estimation uncertainty for Target FY 2021.

Dilapidations provisions

As a result of the implementation of the GBP 2 stake limit on B2 gaming products in the William Hill Retail business on 1 April 2019, the Target Group took the decision to close 713 shops in the third quarter of 2019. The Target Group provided for costs of closure with a remaining provision held at 31 December 2019 of GBP 17.4 million. Within this provision, GBP 12.1 million related to dilapidations and shop strip out cost provisions which were estimated using a best estimate cost per square foot and exit date on each lease. The actual results were expected to differ as lease exits were negotiated with any changes to the amount provided recognised in the Target Business Historical Financial Information as part of the portfolio shop closure cost classified as an exceptional item in 2019. Based on management's knowledge and experience and third-party advice at the time, the directors believed the range of reasonably possible values for the dilapidations provisions as at 31 December 2019 to be GBP 7.7 million to GBP 18.6 million. Since 2019 and as dilapidations costs are being settled over time, the provision has reduced to a level management consider not material to be a key source of estimation uncertainty

ADOPTION OF NEW AND REVISED ACCOUNTING STANDARDS

For description of new and revised accounting standards and interpretations the Target Business adopted in preparing the combined financial information included in the Target Business Historical Financial Information, see "Adoption of new and revised standards" of the Target Business Historical Financial Information set out in Appendix 3 to this announcement.

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

The information in this section is based on unaudited management accounts of the Company and the Target Business and remains subject to change. The information has not been subject to any independent review or audit, and no representation or warranty, express or implied, is made or given by the Company. Such information presented in this section is subject to verification, correction, completion and change without notice. Past performance of the Company or the Target Business, such as the information presented in this section, is not indicative of future performance. The future performance of the Company, its subsidiaries and the Target Business will depend on numerous factors which are subject to uncertainty. The Company, its shareholders, advisors and employees and those of their affiliates are not liable for the accuracy and completeness of the information provided in this section. The final version of this section, including a report from the reporting accountant's thereon, will be included in the Combined Prospectus and Circular that is expected to be published in the coming weeks.

Basis of preparation

The unaudited pro forma financial information of the Enlarged Group (the "Unaudited Pro Forma Financial Information") has been prepared to illustrate the effect of the (i) the Placing; (ii) the proposed financing arrangements to part-fund the Proposed Acquisition; and (iii) the Proposed Acquisition on:

· the consolidated net assets of the 888 Group as at 31 December 2021, as if these transactions had taken place on that date; and

· the consolidated income statement of the 888 Group for the twelve months ended 31 December 2021, as if these transactions had taken place on 1 January 2021.

The Unaudited Pro Forma Financial Information has been prepared for illustrative purposes only. The hypothetical financial position or results included in the Unaudited Pro Forma Financial Information may differ from the Enlarged Group's actual financial position or results. The Unaudited Pro Forma Financial Information has been prepared on the basis set out in the notes below and has been prepared in a manner consistent with the accounting policies that will be applied by the Enlarged Group for the year ending 31 December 2021 and in accordance with the requirements of sections 1 and 2 of Annex 20 of the UK Prospectus Delegated Regulation. The Unaudited Pro Forma Financial Information does not constitute financial statements within the meaning of section 434 of the Companies Act 2006.

Unaudited pro forma statement of net assets of the Enlarged Group as at 31 December 2021