During an investor call on July 9, Zeal’s CEO Dr. Stefan Tweraser expressed confidence that the company’s reputation as a rigorously regulated operator in Germany would serve it well as it enters the UK prize-draw market. He anticipates that this sector will see increased regulation in the future.
The recent acquisition of UK prize draw operator SevenCanyon, announced earlier this week, signifies Zeal’s first venture outside Germany. This move aligns with their plans to expand their prize draw offerings and enter a new market, as hinted during their FY25 earnings report in March.
Tweraser noted that Zeal has thrived in the heavily regulated German market and expects the UK to adopt stricter regulations for prize draws eventually. 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 added that the current conditions in the UK are ideal for Zeal due to its status as a well-capitalized consolidator with the necessary infrastructure and rules-based setup. Tweraser emphasized that rising standards will benefit operators proficient in compliance and market expertise.
At present, the UK prize draw sector operates outside the traditional lottery regulations, following a voluntary code of conduct that prioritizes player protection, which was introduced in May. “SevenCanyon was one of the big proponents and big drivers of that voluntary code of conduct,” Tweraser highlighted.
The UK prize draw market is predicted to experience substantial growth. A report from Rokker in April indicated that this market currently generates approximately £1.3 billion in annual revenue and attracts around 7.4 million active players.
Some industry stakeholders see the lack of stringent regulation as beneficial for new entrants and traditional iGaming operators. Jamie Pinner, a senior leader at DrawHouse, pointed out 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.”
Regarding its market entry strategy, Zeal characterized the acquisition as part of a coherent growth plan rather than just a tactically opportunistic purchase. Tweraser remarked, “[The UK prize-draw sector] is growing at a fast pace. It’s highly fragmented with more than 400 operators, making it a prime market for us to enter as a professional player.”
In the previous year, SevenCanyon reported around £99 million in billings. When converted to gross gaming revenue, more closely aligned with Zeal’s reporting standards, the figure drops to approximately £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.”
Zeal identified various synergies from the acquisition, leveraging its customer relationship management capabilities and expertise in large-scale ‘dream house’ raffles to enhance SevenCanyon’s home prize draws.
The financial aspects of the deal included a cash payment of £33.9 million at closing, along with an earn-out of up to £4.8 million based on meeting performance targets within six months. The deal also covered SevenCanyon’s prize inventory, which includes cars and cash. To finance 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, but our cash at bank remains meaningful,” Behrendt explained, adding, “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 positively impact its EBITDA, projecting an increase into the high single-digit million-euro range during the first full year of SevenCanyon’s integration into the business.
In terms of leadership, Tweraser indicated that the founders of SevenCanyon are expected to depart within six months of the deal's completion. A successor from within Zeal will take over the operations. “We have a successor. He’s been with Zeal for more than two years. His name is Alex Green. He has a very strong track record in the UK market, knowing the UK lottery market for over two decades,” Tweraser stated.
The acquired entity will function as a semi-autonomous unit under Zeal’s business owner model, supporting an entrepreneurial spirit while benefitting from the broader company’s compliance, finance, and technology resources.
