In an investor call on July 9, Zeal CEO Dr. Stefan Tweraser emphasized the company's strong regulatory background in Germany as a significant advantage for its entry into the UK prize-draw market. He anticipates this sector will experience increased regulation in the future.
Zeal's recent acquisition of Seven Canyon, a UK prize draw operator, marks its first venture beyond Germany. This move aligns with Zeal's earlier indications of plans to broaden its prize draw offerings and tap into new markets, as mentioned during their FY25 earnings call in March.
Tweraser explained that Zeal has thrived in Germany's stringent regulatory environment and expressed confidence that similar standards will emerge in the UK. “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 stated.
He further noted, “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 market operates outside traditional lottery regulations, adhering instead to a voluntary code of conduct aimed at enhancing player protection, which was introduced in May. Tweraser highlighted that Seven Canyon was instrumental in promoting this voluntary code during his remarks.
The UK prize draw sector is projected for significant growth. According to an April report by Rokker, the market generates approximately £1.3 billion in annual revenue, with around 7.4 million active players.
Industry representatives have indicated that the current regulatory leniency is beneficial for both new entrants and established iGaming companies looking to venture into this area. Jamie Pinner, a senior leader at DrawHouse, commented in May that without the constraints of Remote Gaming Duty, prize draws present a more profitable revenue stream compared to sportsbooks or casino offerings, at least for now.
Regarding Zeal's strategic growth plan, Tweraser characterized the acquisition of Seven Canyon as a well-considered move rather than an opportunistic buy. “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,” he remarked.
In the previous year, Seven Canyon reported nearly £99 million in billings, with an estimated gross gaming revenue of around £30 million. Zeal's CFO, Andrea Behrendt, noted that Seven Canyon is a profitable and cash-generating entity with an EBITDA exceeding £10 million in the last financial year.
Zeal expects to gain synergies from the acquisition by applying its customer relationship management (CRM) capabilities and expertise in large-scale "dream house" raffles to enhance Seven Canyon’s house prize draws.
The acquisition deal consisted of a cash consideration of £33.9 million payable at closing, along with an earn-out of up to £4.8 million based on meeting specified performance goals within six months. Additionally, Zeal acquired Seven Canyon's prize inventory, which includes cars and cash prizes. To fund the acquisition, Zeal secured a €40 million loan from Deutsche Bank with a seven-year term, supplemented by a smaller intercompany loan.
“This [deal] increased our external debt to approximately €100 million, and our cash at bank is still very meaningful,” Behrendt stated, adding, “You know that we are a strong cash-generating business, with a post-transaction cash position 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 of Seven Canyon’s integration.
Tweraser indicated that the founders of Seven Canyon are expected to depart within six months following the completion of the deal. The company has appointed an internal successor, Alex Green, who has over two decades of experience in the UK market. “He has a very strong track record in the UK lottery market,” Tweraser noted.
Seven Canyon will function as a semi-autonomous entity under Zeal’s business owner model, allowing it to maintain its entrepreneurial spirit while benefiting from the broader company’s compliance, finance, and technological resources.
