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ZEAL Network SE (-)
ZEAL Network SE announces takeover offer for Germany's largest private
digital lottery broker Lotto24 AG
19-Nov-2018 / 08:30 CET/CEST
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*Press release*
*ZEAL Network SE announces takeover offer for Germany's largest private
digital lottery broker Lotto24 AG*
· _The transaction will create a digital lottery group with currently more
than 5 million combined customers globally, current combined billings of
about EUR 500 million, and a diverse international footprint_
· _The combined group will build on the existing position of Lotto24,
discontinue the German secondary lottery business of Tipp24 and transform
it to a locally licensed online broker. The companies jointly aim to
accelerate growth of online brokerage in the EUR 8.7 billion German
lottery market_
· _The all-share takeover delivers significant benefits for shareholders
with expected cost synergies of EUR 57 million per year, strong future
cash generation, and a reduced risk profile_
· _The transaction strengthens the German lottery market and returns to
federal states and their lottery beneficiaries_
· _ZEAL expects to offer one new ZEAL share for ca. 1.6 Lotto24 shares,
reflecting the ratio of the volume-weighted average prices of ZEAL and
Lotto24 shares over the past three months_
· _ZEAL has secured irrevocable commitments to accept the offer from major
shareholders representing approximately 65% of Lotto24 shares_
*(London, 19 November 2018)*
ZEAL Network SE ('ZEAL') today announced an all-share voluntary takeover
offer for Germany's largest private digital lottery broker, Lotto24 AG
('Lotto24'). On completion, the transaction will create a digital lottery
group with currently more than 5 million combined customers globally,
current combined billings of about EUR 500 million, and a diverse
international footprint.
In the context of the deal, and consistent with its renewed strategy to
de-risk its business model and focus on locally-licensed businesses, ZEAL
intends to transform its German secondary lottery business into a locally
licensed online brokerage model after reacquiring control of its myLotto24
and Tipp24 subsidiaries and, in due course, to relocate ZEAL to Germany. The
transaction will significantly strengthen the German lottery market and
expand returns to federal states and their lottery beneficiaries.
*A strong platform for accelerated growth and shareholder value creation*
The transaction combines the strong balance sheet, high-quality loyal
customer base, and technological capabilities of ZEAL with the proven
expertise of Lotto24 in the German lottery brokerage market. The enlarged
Group will be in a unique position to accelerate online brokerage growth in
the German lottery market.
The Group will also continue to pursue its international growth ambitions,
building on the existing, diverse international portfolio (UK, Ireland,
Spain, Norway, and Netherlands) and global development pipeline of ZEAL,
with the aim of creating long-term growth and sustained shareholder and
customer value.
ZEAL believes that the change to its business model in Germany will deliver
significant benefits to ZEAL shareholders in the medium term as a result of
reduced operational, tax and regulatory risk as well as improved growth
potential. As part of the business model change, ZEAL has taken the decision
to discontinue certain products and to focus on less volatile brokerage
income in the German market, resulting in net annual run-rate revenue
dis-synergies of ca. EUR 107 million, which is expected to be compensated
for over time through accelerated growth of the enlarged Group. The
combination with Lotto24 is also expected to deliver annual run-rate cost
synergies of c. EUR 57 million through greater platform efficiencies and
significant reductions in other operational costs. Further details of these
revenue dis-synergies and cost savings are set out in Appendix A to this
announcement.
In addition, ZEAL management has identified further cost savings of
approximately EUR 4 million, which do not arise as a consequence of the
transaction and sees additional potential future upside.
*Dr Helmut Becker, CEO of ZEAL, said:* 'ZEAL will reunite with Germany's
largest digital lottery broker. We will have a significantly enlarged, loyal
customer base, strong technology and marketing platforms, and an
exceptionally experienced team. Together with our plans to regain control of
Tipp24 and transform its German business models, this puts us in an
excellent position to accelerate online growth in both the EUR 8.7 billion
German lottery market and EUR 270 billion global lottery sector - as a
locally-licensed broker, licensed operator, and lottery investor. This
transaction is good for shareholders, good for customers, and good for the
German federal states and their lottery beneficiaries. We have held initial,
constructive conversations with Lotto24 and look forward to further engaging
with the management to achieve a successful combination of the businesses.
We also look forward to a successful and constructive cooperation with
Germany's state lotteries and invite all shareholders to join us on this
journey.'
Since its IPO on the Frankfurt Stock Exchange in 2012, Lotto24 has grown
rapidly. In 2017, Lotto24 generated billings of EUR 220.7 million and
revenues of EUR 25.2 million. In October 2018, Lotto24 upgraded its full
year guidance, anticipating billings' growth of between 38% and 43% for
2018. In the first nine months of 2018, the company increased billings by
43% to EUR 235.9 million, revenues grew almost 50% to EUR 28.1 million, and
the total number of registered customers rose by 36% to 2.04 million.
ZEAL has nearly two decades' experience as an online lottery operator,
reseller and investor. In 2017, ZEAL delivered billings of EUR 280.5 million
and revenues of EUR 134.3 million. In the first nine months of 2018,
billings increased 5% to EUR 212.4 million, revenues rose by 19% to EUR
111.2 million, and the number of new customers grew by 54%, taking the total
number of registered customers of the Group to more than 3.5 million.
*Transaction supported by major Lotto24 shareholders*
ZEAL will offer Lotto24 shareholders the opportunity to exchange their
Lotto24 shares for shares in ZEAL. The offer consideration will reflect the
ratio of the volume-weighted average share prices of both Lotto24 and ZEAL
over the past three months before announcement of the transaction. Subject
to the final determination of the minimum prices required by law and the
final terms set forth in the offer document, ZEAL intends to offer one new
ZEAL share as consideration in exchange for each ca. 1.6 tendered shares of
Lotto24. Independently of the offer, ZEAL expects to pay an ordinary interim
dividend of EUR 1.00 by year-end 2018.
In a clear statement of shareholder support for the deal, ZEAL today entered
into irrevocable tender agreements with major shareholders of Lotto24,
namely with Günther Group, Working Capital and Jens Schumann. They represent
approximately 65% of the shares and voting rights in Lotto24. By entering
into the tender agreements, these shareholders have undertaken to tender
their shares in Lotto24 into the offer.
*Jonas Mattsson, Chief Financial Officer of ZEAL*: 'We believe this deal
creates significant value for ZEAL and Lotto24 shareholders. The future
growth prospects, significant reduction of regulatory risk and the related
uncertainties, and EUR 57 million of annual cost synergies make the combined
group a highly attractive long-term investment proposition. With our shared
history, we are confident of achieving a seamless integration of both
companies. We encourage all holders of Lotto24 and ZEAL shares to follow the
major shareholders and take part in the offer.'
The offer will be made in accordance with the conditions to be set forth in
the offer document, among others a minimum acceptance rate of 50% plus one
share of Lotto24. Further details of the offer and its terms, including the
acceptance period, will be contained in the offer document. ZEAL expects
that the offer document will be published on the website www.zeal-offer.com
at the beginning of 2019.
An extraordinary general meeting of ZEAL is expected to be held at the end
of December 2018, at which ZEAL will ask its shareholders to approve the
offer, including the acquisition of Lotto24 shares from certain members of
the Supervisory Board of ZEAL or persons connected with them, and authorise
the Executive Board to allot a number of shares as required to fund the
offer. As Günther Group has made it a condition to its tender agreement with
ZEAL that it will not, as a consequence of the offer, be subject to a legal
obligation to make a general offer for the shares in ZEAL which it does not
own at that time, ZEAL will furthermore propose a resolution to its
shareholders (other than Günther Group and persons acting in concert with
Günther Group) to approve the waiver of such obligation granted by the Panel
on Takeovers and Mergers. The ZEAL shareholder approvals will be a condition
for ZEAL to publish the offer document.
Discussions with the German gambling regulatory body about the future
licensing arrangements for the enlarged Group have already been initiated.
ZEAL expects to complete the transaction in the first half of 2019.
*Updated ZEAL Profit Guidance*
As previously announced today, the Executive Board has decided to adjust the
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