During an investor call on July 9, Zeal CEO Dr. Stefan Tweraser emphasized that the company’s strong track record as a regulated operator in Germany would serve it well as it ventures into the UK prize-draw market. He anticipates that the UK sector will move towards stricter regulations, which he believes will favor operators like Zeal with extensive compliance experience.
Earlier this week, Zeal announced its acquisition of Seven Canyon, a UK prize draw operator, marking its first expansion beyond Germany. This move follows Tweraser’s statements in March during the FY25 earnings call, where he hinted at plans for growth in the prize draws sector.
Tweraser highlighted Zeal’s success in heavily regulated markets, stating, "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 remarked that the current environment is ideal for well-capitalized consolidators with established infrastructure.
The UK prize draw market presently operates outside typical lottery regulations, instead following a voluntary code of conduct aimed at enhanced player protection that was introduced in May. Tweraser noted that Seven Canyon played a significant role in pushing for this code.
Growth predictions for the UK prize draw market are optimistic. A report by Rokker from April estimates the market generates roughly £1.3 billion in annual revenue and engages about 7.4 million active players. Despite the lack of strict regulations, industry stakeholders view this as an opportunity for new entrants and traditional iGaming companies.
Jamie Pinner, a senior leader at DrawHouse, recently commented on this potential, saying, “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 a strategic move rather than a mere opportunistic purchase, Tweraser indicated that the rapidly growing and fragmented UK prize draw sector, with over 400 operators, presented an attractive market for Zeal. Last year, Seven Canyon reported about £99 million in billings, equating to around £30 million in gross gaming revenue, which aligns with Zeal's reporting criteria. Zeal CFO Andrea Behrendt noted that Seven Canyon is already a profitable and cash-generating business, having achieved an EBITDA exceeding £10 million in the last financial year.
For this acquisition, Zeal has committed £33.9 million in cash payable at closing, alongside a potential earn-out of up to £4.8 million based on performance targets within six months. The deal also includes Seven Canyon’s prize inventory, such as cash and cars. To support this acquisition, Zeal secured a €40 million loan from Deutsche Bank and a smaller intercompany loan, raising its external debt to about €100 million, although it maintains a strong cash reserve of around €70 million post-transaction.
Looking ahead, Zeal expects the acquisition to boost its EBITDA into the high single-digit million-euro range within the first full year after the integration of Seven Canyon.
As for leadership transitions, Tweraser mentioned that the founders of Seven Canyon are expected to leave within six months of the deal's completion, with a successor from within Zeal appointed to take over. Alex Green, who has been with Zeal for over two years and has extensive knowledge of the UK lottery market, will lead the newly acquired business as it operates semi-autonomously under Zeal's structure, benefiting from the parent company's compliance, finance, and technology support.
