During an investor call on July 9, Dr. Stefan Tweraser, CEO of Zeal, highlighted the advantages of the company's solid reputation as a regulated operator in Germany for its entry into the UK prize-draw market. He anticipates that this sector will see increased regulation in the coming years.
Zeal's recent acquisition of Seven Canyon, a UK prize draw operator, represents its first move beyond the German market. The company had previously indicated its ambition to expand into prize draws and explore new markets in its FY25 earnings call in March.
Tweraser informed analysts that Zeal has thrived in heavily regulated environments, suggesting the same could happen in the UK. “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 noted, “This is an ideal environment for us as a well-capitalized consolidator with the right infrastructure and a rules-based setup.” Tweraser pointed out that rising standards would benefit operators equipped with strong compliance capabilities and relevant market expertise.
Currently, the UK prize draw sector operates without strict lottery regulation but follows a voluntary code of conduct aimed at enhancing player protection, which was introduced in May. Tweraser remarked on Seven Canyon’s significant role as a proponent of this code during the call.
A report by Rokker published in April estimates that the UK prize draw market is worth around £1.3 billion annually and draws in approximately 7.4 million active players. While some industry participants view the current lack of rigorous regulation as favorable for newcomers, others see it as beneficial for established iGaming operators entering the market. Jamie Pinner, senior leader at DrawHouse, highlighted in May that prize draws are not subjected to Remote Gaming Duty, making them a more efficient revenue source compared to traditional sportsbook or casino products.
Tweraser characterized the acquisition of Seven Canyon as part of a strategic growth approach rather than a mere opportunistic purchase, noting, “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.”
Seven Canyon reported around £99 million in billings last year, translating into approximately £30 million in gross gaming revenue. “Seven Canyon is already a scaled, profitable and cash-generating business with an EBITDA of more than £10 million in the most recent financial year,” added Andrea Behrendt, Zeal CFO.
The acquisition involved an initial cash payment of £33.9 million at closing, plus an additional earn-out of up to £4.8 million depending on performance targets met within six months. The deal also included Seven Canyon's prize inventory, which consists of cars and cash. To fund this acquisition, Zeal secured a €40 million loan from Deutsche Bank with a seven-year term, alongside a smaller intra-company loan. “This deal increased our external debt to approximately €100 million, and our cash at bank remains very meaningful,” Behrendt said. “We are a strong cash-generating business, with a post-transaction cash balance of around €70 million.”
Zeal expects this acquisition to positively impact its EBITDA, raising it into the high single-digit million-euro range in the first full year that Seven Canyon operates within the company. Tweraser noted that Seven Canyon’s founders are likely to leave the business within six months post-transaction, while the company has already appointed Alex Green, a Zeal executive with over two decades of experience in the UK lottery market, as a successor. The new entity will function as a semi-autonomous unit designed to retain an entrepreneurial spirit while receiving support in compliance, finance, and technology from Zeal.
