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Germany – Zeal sets sights on Germany with Lotto24 bid

By - 19 November 2018

ZEAL Network is making a play for Germany’s largest private digital lottery broker, Lotto24 AG as it looks to create a digital lottery group with currently more than 5m combined customers globally, current combined billings of about €500m, and a diverse international footprint.

The all-share takeover delivers significant benefits for shareholders with expected cost synergies of €57m per year, strong future cash generation, and a reduced risk profile

ZEAL intends to transform its German secondary lottery business into a locally licensed online brokerage model after reacquiring control of its myLotto24 and Tipp24 subsidiaries and, in due course, to relocate ZEAL to Germany.

“The transaction will significantly strengthen the German lottery market and expand returns to federal states and their lottery beneficiaries,” Zeal stated. “The enlarged Group will be in a unique position to accelerate online brokerage growth in the German lottery market.”

The Group will also continue to pursue its international growth ambitions, building on the existing, diverse international portfolio (UK, Ireland, Spain, Norway, and Netherlands) and global development pipeline of ZEAL, with the aim of creating long-term growth and sustained shareholder and customer value.

Dr Helmut Becker, CEO of ZEAL, said: “ZEAL will reunite with Germany’s largest digital lottery broker. We will have a significantly enlarged, loyal customer base, strong technology and marketing platforms, and an exceptionally experienced team. Together with our plans to regain control of Tipp24 and transform its German business models, this puts us in an excellent position to accelerate online growth in both the €8.7bn German lottery market and EUR 270 billion global lottery sector – as a locally-licensed broker, licensed operator, and lottery investor. This transaction is good for shareholders, good for customers, and good for the German federal states and their lottery beneficiaries. We have held initial, constructive conversations with Lotto24 and look forward to further engaging with the management to achieve a successful combination of the businesses. We also look forward to a successful and constructive cooperation with Germany’s state lotteries and invite all shareholders to join us on this journey.”

Since its IPO on the Frankfurt Stock Exchange in 2012, Lotto24 has grown rapidly. In 2017, Lotto24 generated billings of €220.7m and revenues of €25.2m. In October 2018, Lotto24 upgraded its full year guidance, anticipating billings’ growth of between 38 per cent and 43 per cent for 2018. In the first nine months of 2018, the company increased billings by 43 per cent to €235.9m, revenues grew almost 50 per cent to €28.1m, and the total number of registered customers rose by 36 per cent to 2.04m.

Jonas Mattsson, Chief Financial Officer of ZEAL: “We believe this deal creates significant value for ZEAL and Lotto24 shareholders. The future growth prospects, significant reduction of regulatory risk and the related uncertainties, and EUR 57 million of annual cost synergies make the combined group a highly attractive long-term investment proposition. With our shared history, we are confident of achieving a seamless integration of both companies. We encourage all holders of Lotto24 and ZEAL shares to follow the major shareholders and take part in the offer.”

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