On July 9, during an investor call, Dr. Stefan Tweraser, CEO of Zeal, highlighted how the company’s reputation as a well-regulated entity in Germany could bolster its entry into the UK prize-draw market, which he anticipates will become more regulated.
Zeal recently announced its acquisition of the UK prize draw operator Seven Canyon, marking its first move outside Germany. Earlier this year, during its FY25 earnings call in March, the company indicated plans to expand its prize draw offerings and explore new markets.
Tweraser explained that the operator has thrived in Germany's strict regulatory environment and expects the UK to adopt tighter regulations over time.
"We expect the UK prize draw to continue moving towards more formalized rules and higher regulated standards. This should really favor us with strong experience over the last 20 years in a highly regulated market like Germany," he stated.
He further asserted, "This is an ideal environment for us as a well-capitalized consolidator with the right infrastructure and a rules-based setup. Rising standards favor operators with a strong compliance capability and market-related expertise."
Currently, the UK prize draw sector operates outside traditional lottery regulations and is governed by a voluntary code of conduct aimed at enhancing player protection, which was initiated in May.
Tweraser noted, "Seven Canyon was one of the big proponents and big drivers of that voluntary code of conduct," emphasizing its role in these developments.
The UK prize draw market’s growth potential is notable. A report released by Rokker in April estimated that it now generates approximately £1.3 billion annually, attracting about 7.4 million active players. Industry experts have pointed to the absence of strict regulations as a favorable factor for both new and traditional iGaming operators entering the market.
Jamie Pinner, a senior leader at DrawHouse, previously remarked, "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."
Describing the acquisition as part of a strategic growth initiative rather than an opportunistic buy, Tweraser said, "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."
In the last fiscal year, Seven Canyon reported around £99 million in billings, with approximately £30 million in gross gaming revenue, aligning with Zeal’s reporting standards. Zeal’s CFO Andrea Behrendt mentioned that Seven Canyon is already a sizable, profitable venture, boasting more than £10 million in EBITDA for the previous financial year.
From this acquisition, Zeal expects to create synergies by utilizing its robust customer relationship management (CRM) systems and leveraging its experience in large-scale “dream house” raffles to enhance the prize draw offerings at Seven Canyon.
The deal entails a cash payment of £33.9 million at closing, accompanied by a performance-based earn-out of up to £4.8 million that must be met within a six-month period. The acquisition also includes Seven Canyon’s prize inventory, which comprises cars and cash prizes.
To facilitate this acquisition, Zeal secured a €40 million loan from Deutsche Bank, featuring a seven-year term, alongside an intercompany loan. Behrendt noted, “This 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 amount of around €70 million."
Zeal anticipates that this acquisition will boost its EBITDA significantly, moving it into the high single-digit million-euro range in the first full year with Seven Canyon integrated into the business.
Leadership transitions will occur post-acquisition, with the founders of Seven Canyon set to exit within the first six months. Tweraser confirmed that a successor from within Zeal, Alex Green, will take the lead. Green has been with Zeal for over two years and has extensive experience in the UK lottery market spanning more than two decades.
The newly acquired business will function as a semi-autonomous unit under Zeal’s "business owner" model, allowing it to retain an entrepreneurial spirit while benefiting from the overarching company’s compliance, finance, and technological support.
