Lottery betting brokerage Zeal Network has made a bid to acquire its former subsidiary Lotto24. The combination of the two businesses would create a digital lottery business with over 5 million customers worldwide, billings of €500 million, and a diversified international presence.
The companies would be reuniting after Lotto24 was spun off as an independent business in 2012. Zeal CEO Dr Helmut Becker expressed excitement about the reunion, highlighting the enlarged customer base, strong technology and marketing platforms, and experienced team.
Zeal proposes to offer one new Zeal share for every 1.6 Lotto24 shares, reflecting the past three-month average prices of the two companies. The bid has already been accepted by major shareholders including the Günther Group, Working Capital, and deputy chairman Jens Schumann.
The deal is expected to deliver cost synergies of around €57 million per year and reduce the risk profile, while significantly increasing revenue. Lotto24 reported billings of €220.7 million and revenue of €25.2 million in 2017, with projected billings growth of 38% to 43% in 2018. Zeal reported billings of €280.5 million and revenue of €134.3 million in 2017.
The strategy for future growth involves focusing on the German lottery brokerage market by discontinuing Lotto24’s secondary lottery business and relocating Zeal’s headquarters from London to Germany. The goal is to make Germany the primary focus of the business. Discussions with German lottery regulators have already begun regarding licensing arrangements.
An extraordinary general meeting is planned for late December to seek approval from Zeal shareholders, with the offer document expected to be published in early 2019. The transaction is projected to be completed in the first half of 2019, pending shareholder and regulatory approval.
As a result of the deal, Zeal’s executive board has revised its full-year forecast for earnings before interest and tax to a range of €33 million to €38 million.
Zeal’s share price on the Frankfurt Stock Exchange dropped nearly 9% following the announcement.
