During an investor call on July 9, Dr. Stefan Tweraser, CEO of Zeal, emphasized that the company’s strong reputation as a regulated operator in Germany would enhance its entry into the UK prize-draw market. He anticipates that this sector will see increased regulation moving forward.
Zeal's recent acquisition of Seven Canyon, a UK prize draw operator, marks its first venture outside Germany. This follows hints dropped during Zeal's FY25 earnings report in March, where the company signaled intentions to expand its prize draw offerings and tap into new markets.
Tweraser remarked that Zeal has prospered in the tightly regulated German market, predicting that similar regulations would be adopted in the UK. He stated, "We expect the UK prize draw to continue moving towards more formalised rules and higher regulated standards. This should really favour us with strong experience over the last 20 years in a highly regulated market like Germany."
He further explained, "This is an ideal environment for us as a well-capitalised consolidator with the right infrastructure [and] a rules-based setup. Rising standards favour operators with a strong compliance capability and market-related expertise."
Currently, the UK prize draw sector operates without traditional lottery regulations, forming instead through a voluntary code of conduct that emphasizes enhanced player protection, which was introduced in May. Tweraser pointed out that Seven Canyon was instrumental in promoting this code of conduct.
The UK prize draw market is projected for significant growth. A recent Rokker report estimates the market generates around £1.3 billion annually and counts approximately 7.4 million active users.
Industry insiders have noted that the absence of stringent regulations offers advantages for new entrants as well as traditional iGaming operators. Jamie Pinner from DrawHouse noted in May, "One of the key advantages in the UK is that prize draws are not currently subject to Remote Gaming Duty. That makes them a far more efficient revenue stream than sportsbook or casino products, at least for the time being."
Zeal described its acquisition of Seven Canyon as a strategic move rather than a mere opportunistic buy, as Tweraser explained, "[The UK prize-draw sector] is growing at a fast pace. It's highly fragmented with more than 400 operators, so a prime market for us to enter as a professional player."
Last year, Seven Canyon reported nearly £99 million in billings, and its gross gaming revenue, aligning more with Zeal’s reporting criteria, stood at about £30 million. Zeal’s CFO, Andrea Behrendt, noted, "SevenCanyon is already a scaled, profitable, and cash-generating business with an EBITDA of more than £10 million in the most recent financial year."
The acquisition deal included a cash payment of £33.9 million at closing, alongside an earn-out of up to £4.8 million linked to performance targets set for six months.
Seven Canyon’s prize inventory, which includes items like cars and cash, was also a component of the transaction. To facilitate the purchase, Zeal secured a €40 million loan from Deutsche Bank over a seven-year term, with additional smaller intercompany loans.
Behrendt quantified the deal's impact, stating, "This [deal] increased our external debt to approximately €100 million, and our cash at bank is still very meaningful. You know that we are a strong cash-generating business, with a post-transaction of around €70 million."
Zeal anticipates that the acquisition will positively influence its EBITDA, projecting an increase into the high single-digit million-euro range within the first full year after absorbing Seven Canyon.
Tweraser revealed that the founders of Seven Canyon are expected to depart within six months following the completion of the deal. A successor, Alex Green, who has been with Zeal for over two years, has been appointed. Tweraser commented on Green’s background: "He has a very strong track record in the UK market and knows the UK lottery market for more than two decades."
The newly acquired entity will function as a semi-autonomous unit within Zeal's operational model, which promotes an entrepreneurial spirit while benefiting from Zeal's shared resources in compliance, finance, and technology.
