On July 9, during an investor call, Dr. Stefan Tweraser, CEO of Zeal, emphasized that the company's extensive experience as a regulated operator in Germany would support its entry into the UK prize-draw market. He anticipates increasing regulation in this sector going forward. Recently, Zeal announced its acquisition of Seven Canyon, a UK prize draw operator, marking the company’s first move beyond Germany. This step was hinted at during their FY25 earnings report in March, where Zeal discussed plans to expand its prize draw offerings in a new market.
Tweraser expressed confidence, indicating that the operator has excelled in Germany's tight regulatory environment and expects similar developments in the UK in the future. "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 added that the current conditions in the UK create prime opportunities for well-capitalized consolidators like Zeal, which come equipped with robust infrastructure and compliance capabilities.
At present, the UK prize draw market functions outside of conventional lottery regulations and operates under a voluntary code of conduct aimed at enhancing player protection, which was implemented in May. Tweraser highlighted that Seven Canyon played a significant role in establishing this code.
The growth potential in the UK prize draw market is considerable. An April report from Rokker posited that the market generates approximately £1.3 billion annually, with around 7.4 million active players. While some industry representatives point to the lack of stringent regulations as an advantage for new entrants, Jamie Pinner, a senior executive at DrawHouse, remarked in May about the efficiency of revenue streams from prize draws compared to sports betting and casino products, given the absence of Remote Gaming Duty affecting them.
Regarding their UK expansion strategy, Tweraser noted, "[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." Last year, Seven Canyon reported about £99 million in billings, yielding approximately £30 million in gross gaming revenue. According to Zeal’s CFO, Andrea Behrendt, Seven Canyon is already profitable, posting an EBITDA exceeding £10 million for the latest financial year.
Zeal anticipates various synergies from this acquisition, including the utilization of its customer relationship management systems and expertise in conducting substantial prize-related promotions to enhance Seven Canyon’s offerings. The acquisition deal required a cash payment of £33.9 million at closing, with an additional earn-out potential of up to £4.8 million based on performance benchmarks to be met within six months.
The acquired prize inventory includes various assets such as cars and cash. To fund the acquisition, Zeal secured a €40 million loan from Deutsche Bank, alongside a smaller intercompany loan. Behrendt noted that this move increased their external debt to around €100 million, while the company still holds significant cash reserves.
Zeal predicts that the acquisition will have a positive impact on its EBITDA, potentially raising it into the high single-digit million-euro range within a year of Seven Canyon becoming part of the company.
In terms of leadership, Tweraser mentioned that the founders of Seven Canyon are expected to leave the company within six months post-acquisition, with Zeal appointing Alex Green, who has been with the company for two years and has extensive experience in the UK lottery market, as their successor. The acquired entity will operate independently under Zeal’s business owner model, designed to retain its entrepreneurial spirit while drawing on the shared compliance, finance, and technology resources of the parent company.
