Sportpesa: Billion-dollar name at the heart of major legal battle

SportPesa CEO Captain Ronald Karauri. [Courtesy]

Names can be worth billions fighting for. One such name is ‘SportPesa'.

So, when the directors of Milestone Gaming Limited appear today before the Betting Control and Licensing Board (BCLB) to show cause why they breached the requirements for the ownership structure of their company, they will be hoping that it will all end up with them owning the SportPesa brand.

As they lay bare the ownership, directorship and shareholding structure of the new company, disgruntled local shareholders of Pevans East Africa, which originally owned SportPesa brand, will be following the proceedings at KCS House keenly.

These shareholders insist that the current shareholders of Milestone are the same ones pushing them away from their rightful fortunes that come with the privilege of owning the SportPesa trademark.

Not only do they complain of their stakes at Sportpesa Global Holdings being diluted in favour of Sportpesa CEO Ronald Karauri and his Bulgarian associates, they also insist that SportPesa trademark moved from Pevans East Africa without their approval.

Also at stake is the Sh15 billion tax obligation that Pevans had agreed to pay the taxman, as questions arise on whether the new entity to operate the SportPesa brand assets can shoulder the tax obligations of the former.

UK records

Filing in the UK shows that at the end of October 16, 2019, Asenath Wacera, for example, controlled 21 per cent of Sportpesa Global Holdings shares, but by January 21, this year, this stake had been slashed to 3.5 per cent.

Instead, that of Bulgarian shareholder Guerassim Nikolov had risen from 21 to 34.74 per cent.

Others that saw their shareholding thin away include Pevans’ former chairman Paul Ndung'u whose stake declined from 17 to 2.83 per cent.

However, there was a new shareholder, Naogen Investments Inc, whose stake was at 33.1 per cent by January 21, 2020.

They also question the transfer of SportPesa from its original owner Pevans East Africa to the UK-based Sportpesa Global Holdings, arguing that in the filing, Kenya does not appear as one of the countries covered under the protocol.

On November 24, BCLB accused Milestone of “blatantly” changing its shareholding structure.

SportPesa CEO Ronald Karauri during the naming of the Kenya Sevens squad for the Wellington and Sydney Sevens at Kenya Rugby Football Union on Wednesday, Jan 18 2017. [Jonah Onyango, Standard]

This, said the regulator, was in breach of requirements that before any change of ownership, directorship and/or shareholding is made, the company has to seek the approval of the regulator in writing.

The shareholding structure that had been submitted to the regulator showed that the majority of the shares – 9,950 – were held by Nob Five Limited while another 50 belonged to Wilson Ngatia Karungaru.

In turn, Nob Five was owned by John Nderitu who had 250 shares, Jackline Kungu 500 shares and Joseph Mutua 250 shares.

However, after investigations, BCLB found the company had changed its ownership, directorship and shareholding structures without notifying it.

Nob Five was owned by Selenium which had 96 per cent of the shares while the remaining four per cent were owned by Jackline Nyambura Kungu.

Francis Kiarie, the chairman of Pevans and its CEO Ronald Karauri, owned Selenium with 300 and 400 shares respectively.

Operations breach

BCLB said that this was in breach of the applicable operating requirements for which its licence may be varied and or/cancelled.

It thus asked the shareholders of Milestone to appear before BCLB today to show cause why its licence should not be cancelled.

On November 4, Milestone Gaming Limited moved to the High Court seeking judicial review of an earlier decision by BCLB barring it from using the name SportPesa, its domains, shortcodes and pay bill number.

The betting regulator also copied telecommunications companies Safaricom and Airtel as well as the ICT regulator Communications Authority.

On November 18, High Court Judge Pauline Nyamweya admitted the application and certified it as urgent.

“The act of the respondent (BCLB) and interested parties is unconstitutional, not supported by any statute and the ex-parte applicant (Milestone Gaming Limited) has suffered and continues to suffer in violation of its rights and fundamental freedoms,” said Bernard Chauro, the operations manager for Milestone, in an affidavit.

The interested parties include telecommunications companies Safaricom and Airtel and the Communications Authority of Kenya.

Hull City Coach Andrew Stead(L) with FKF President Nick Mwendwa(R) and SportPesa CEO Ronald Karauri (C) addresses a press conference during the Launch of SportPesa AllStars team camp at Kasarani Stadium on Tuesday 17/01/17. [Photo, Boniface Okendo]

SportPesa was founded in 2004 through a partnership of some wealthy Kenyan, Bulgarian and US shareholders.

At its height, the betting powerhouse which minted billions through gaming that had taken root in Kenya, sponsored English Premier League Club Everton. 

The company which would later start having run-ins with government regulators also sponsored the Kenyan premier league as well as the country's major soccer clubs – Gor Mahia and AFC Leopards.

The ownership of the trademark SportPesa is as cryptic as the ownership of Milestone Gaming itself.

According to BCLB, the name SportPesa still belongs to Pevans East Africa and that is why the betting regulator barred Milestone from using it.

Instead, the regulator allowed the new sports betting company to use the name ‘Milestone Bet.’

But Milestone continued to trade in the name of “SportPesa,” according to BCLB.

This, said BCLB, was in flagrant breach of conditions accompanying the licence that Milestone had been issued when it applied for the bookmaker’s licence.

As a result, the regulator went ahead and suspended the company’s operating licence.

The company was required to show cause within seven days from the day it received the letter why its licence should not be cancelled.

Pay bill freeze

As a result, the telecommunications companies Safaricom and Airtel, as well as Communications Authority of Kenya, froze the company’s pay bill.

Milestone then moved to court, arguing that the decision to suspend its licence was unconstitutional as it had been duly allowed to use the name by its owner Sportpesa Global Holdings Limited.

Milestone insists that the name does not belong to Pevans.

A filing in the UK shows that the trademark was transferred from Pevans to Sportpesa Holdings in the United Kingdom for a sum of £100,000 (Sh14,700,000 at current exchange rates).

Pevans shareholders are engaged in a major fight for control of the sports billions, with some local owners accusing Karauri of putting together a scheme to dilute their stakes. Karauri denies these accusations.

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