During an investor call on July 9, Zeal’s CEO, Dr. Stefan Tweraser, expressed confidence that the company’s strong reputation for operating under stringent regulations in Germany would bolster its entry into the UK prize draw sector. Tweraser anticipates that the UK market for prize draws will become more regulated over time.
Zeal’s recent acquisition of UK prize draw operator Seven Canyon, announced earlier this week, signifies its first move beyond the German market. In Zeal's fiscal year 2025 earnings call in March, the company hinted at its intent to broaden its prize draw offerings and enter new markets.
Tweraser noted that Zeal has thrived within Germany's strict regulatory framework and expects similar standards to 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 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 market operates outside the scope of traditional lottery regulations, adhering instead to a voluntary code of conduct aimed at enhanced player protection, which was implemented in May. Tweraser highlighted the role of Seven Canyon in advocating for this voluntary code.
The prize draw sector in the UK is poised for considerable growth, with a report from Rokker in April estimating the market generates around £1.3 billion annually and attracts approximately 7.4 million active players. Some industry professionals have pointed to the lack of strict regulation as a unique opportunity for both new entrants and established iGaming operators. Jamie Pinner, a senior leader at 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 the acquisition of Seven Canyon as part of a calculated growth strategy rather than merely a strategic purchase. Tweraser remarked, “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.” Seven Canyon reported around £99 million in billings last year, with approximately £30 million in gross gaming revenue. Its EBITDA exceeded £10 million for the most recent fiscal year, as noted by Zeal CFO Andrea Behrendt.
The acquisition included a cash payment of £33.9 million upon closing, with the potential for an additional £4.8 million based on performance targets set within six months. Furthermore, Seven Canyon's prize inventory, including cars and cash, was part of the deal. To finance this acquisition, Zeal secured a €40 million loan from Deutsche Bank, with a seven-year term, alongside a smaller intercompany loan. According to Behrendt, this increased Zeal’s external debt to roughly €100 million while still maintaining a significant cash reserve.
Post-acquisition, Zeal expects that the deal will positively impact its EBITDA, potentially elevating it into the high single-digit million-euro range within the first year with Seven Canyon on board.
Looking toward leadership and integration, Tweraser indicated that the founders of Seven Canyon would leave within six months of the deal's finalization, with a successor already identified from within Zeal. “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, knows the UK lottery market for more than two decades already,” Tweraser specified. The acquired entity will function as a semi-autonomous unit under Zeal’s business owner model, designed to uphold an entrepreneurial spirit while benefiting from the broader company’s compliance, finance, and technology resources.
