ZEAL Network SE announces takeover offer for -2-

DJ ZEAL Network SE announces takeover offer for Germany's largest private digital lottery broker Lotto24 AG

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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 
Dissemination of a Regulatory Announcement, transmitted by EQS Group. 
The issuer is solely responsible for the content of this announcement. 
 
NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION (IN WHOLE OR IN PART) DIRECTLY 
OR INDIRECTLY IN, INTO OR FROM THE UNITED STATES OF AMERICA OR ANY OTHER 
JURISDICTION WHERE TO DO SO WOULD CONSTITUTE A VIOLATION OF THE RELEVANT 
LAWS OF SUCH JURISDICTION. 
 
*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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upper end of the ZEAL Group EBIT forecast range for the financial year 2018. 
The Executive Board now anticipates EBIT in the range of EUR 33 million to 
EUR 38 million (previously EUR 33 million to EUR 43 million). The adjustment 
includes the impact of the transaction costs in connection with the 
announced intention of ZEAL to make a public takeover offer for Lotto24 AG 
as well as restructuring expenses in connection with an internal cost 
savings programme initiated today. 
 
Except for the narrowing of the previously forecasted EBIT range, the 
Executive Board confirms its previously published guidance and expects the 
ZEAL Group to generate Total Operating Performance (TOP) of EUR 150 million 
to EUR 160 million in the financial year 2018. 
 
*ENDS 
 
Additional information* 
 
ZEAL invites media, investors and analysts to two separate webcasts and 
conference calls today to present the rationale and details of the 
transaction. The webcasts will be hosted in English by Dr Helmut Becker, CEO 
and Jonas Mattsson, CFO of ZEAL. 
 
*ZEAL Network SE Media Webcast and Conference Call:* 
 
Date: Today, 19 November 2018, 11.15 am CET / 10.15 am GMT 
ConferenceCall dial-ins 
Germany: [phone] 
UK: [phone] 
USA: [phone] 
Confirmation code: 46065908# 
Audio-Webcast: https://webcasts.eqs.com/zeal2420181119media 
A replay of the webcast will be available under the same link after 
conclusion of the conference call. 
 
*ZEAL Network SE Investor and Analyst Webcast and Conference Call:* 
 
Date: Today, 19 November 2018, 12.00 pm CET / 11.00 am GMT 
Conference Call dial-ins 
Germany: [phone] 
UK: [phone] 
USA: [phone] 
Confirmation code: 70491804# 
Audio-Webcast: https://webcasts.eqs.com/zeal20181119investors 
A replay of the webcast will be available under the same link after 
conclusion of the conference call. 
 
*Press contact:* 
ZEAL Network 
Matt Drage 
Head of Corporate Communications 
T: [phone] 
[e-mail] 
 
ZEAL Network 
Frank Hoffmann 
Investor Relations Manager 
[phone] 
[e-mail] [1] 
 
FTI Consulting 
Lutz Golsch 
T: [phone] 
M: [phone] 
[e-mail] 
 
*Important note* 
This announcement is for information purposes only and neither constitutes 
an offer to purchase or exchange nor an invitation to sell or to make an 
offer to exchange, securities of Lotto24 AG ('Lotto24') or ZEAL Network SE 
('ZEAL'). The final terms and further provisions regarding the public 
takeover offer will be disclosed in the offer document once its publication 
will have been approved by the German Federal Financial Supervisory 
Authority (Bundesanstalt für Finanzdienstleistungsaufsicht). ZEAL reserves 
the right to deviate in the final terms and conditions of the public 
takeover offer from the basic information described herein. Investors and 
holders of securities of Lotto24 are strongly recommended to read the offer 
document and all announcements in connection with the public takeover offer 
as soon as they are published, as they contain or will contain important 
information. 
 
The offer will be made exclusively under the laws of the Federal Republic of 
Germany, in particular under the German Securities Acquisition and Takeover 
Act (Wertpapiererwerbs- und Übernahmegesetz (WpÜG)). The offer 
will not be made pursuant to the provisions of jurisdictions other than 
those of the Federal Republic of Germany. Therefore, no other announcements, 
registrations, admissions or approvals of the offer outside of the Federal 
Republic of Germany have been filed, arranged for or granted. 
 
The ZEAL shares have not been and will not be registered under the U.S. 
Securities Act of 1933, as amended, or with any securities regulatory 
authority of any state or any other jurisdiction of the United States of 
America ('USA'). Therefore, subject to certain exceptions, ZEAL shares may 
not be offered or sold within the USA or in any other jurisdiction where to 
do so would be a violation of applicable law. There is no public offering of 
ZEAL shares in the USA. 
 
To the extent this announcement contains forward-looking statements, such 
statements do not represent facts. Forward-looking statements include all 
matters that are not historical facts. They are characterised by the words 
'expect', 'believe', 'estimate', 'intend', 'aim', 'assume', 'plan' or 
similar expressions. Such statements express the intentions, opinions or 
current expectations and assumptions of ZEAL and the persons acting in 
conjunction with ZEAL, for example with regard to the potential consequences 
of the takeover offer for Lotto24, for those shareholders of Lotto24 who 
choose not to accept the takeover offer or for future financial results of 
Lotto24. Such forward-looking statements are based on current plans, 
estimates and forecasts which ZEAL and the persons acting in conjunction 
with it have made to the best of their knowledge, but which do not claim to 
be correct in the future. Forward-looking statements are subject to risks 
and uncertainties that are difficult to predict and usually cannot be 
influenced by ZEAL or the persons acting in conjunction with it. Actual 
events or consequences may differ materially from those contained in or 
expressed by such forward-looking statements. 
 
This release and any materials distributed in connection with this release 
are not directed to or intended for release, publication or distribution (in 
whole or in part) directly or indirectly into or from the USA or any other 
jurisdiction where to do so would constitute a violation of the relevant 
laws of such jurisdiction, nor are they directed to, or intended for use by, 
any person or entity that is a citizen or resident or located in the USA or 
in any locality, state, country or other jurisdiction where such release, 
distribution, publication, availability or use would constitute a violation 
of the relevant laws of such jurisdiction or which would require any 
registration or licensing within such jurisdiction. 
 
Lazard & Co., Limited ('Lazard'), which is authorised and regulated in the 
United Kingdom by the Financial Conduct Authority, is acting exclusively for 
ZEAL Network SE and no one else in connection with the proposals referred to 
in this document. Lazard will not be responsible to anyone other than ZEAL 
Network SE for providing the protections afforded to clients of Lazard nor 
for providing advice in relation to any of the matters referred to or 
contemplated in this document. Neither Lazard nor any of its affiliates owes 
or accepts any duty, liability or responsibility whatsoever (whether direct 
or indirect, whether in contract, in tort, under statute or otherwise) to 
any person who is not a client of Lazard in connection with this document, 
any statement or report contained herein, any of the matters referred to or 
contemplated in this document or otherwise. 
 
*Appendix A* 
 
*QUANTIFIED FINANCIAL BENEFITS STATEMENT* 
 
*Part A* 
 
This Announcement contains statements of estimated cost savings, revenue 
synergies and dis-synergies arising from the Combination (together, the 
'Quantified Financial Benefits Statement'). 
 
A copy of the Quantified Financial Benefits Statement is set out below. 
 
'The Executive Board of ZEAL (the 'ZEAL Board') believes the following: 
 
*Cost synergies* 
 
The quantified recurring pre-tax cost synergies expected to result from the 
Combination principally arise from: 
 
*a) Business model change (non-personnel costs): *Savings in direct costs of 
operations account for around 60 percent of the overall cost synergies: 
 
=- all costs covering the bookmaking risks for the German market (hedging 
costs) will not be required after the transformation to an online brokerage 
business; 
=- reduction of non-deductible VAT within the myLotto24 sub-group. 
 
*b) Organisational efficiency: *Reduction of personnel and other operating 
expenses within the Combined Group, which represents around 40 percent of 
the overall cost synergies and will arise from: 
 
=- removing business related duplicated roles enabled by the migration of 
the German broker businesses of the Combined Group onto one technology 
platform; 
=- removing duplication of central functions roles; 
=- removing duplicates in senior management structure; 
=- rationalisation of the Combined Group's locations; 
=- removing roles related to hedging activities; and 
=- reduction of consultancy expenses / professional fees based on 
de-duplication and changed requirements due to business model change. 
 
The total anticipated cost synergies of EUR 57 million per annum are 
equivalent to approximately 41 percent of the Combined Group operating 
expenses (including personnel expenses) from continuing operations of EUR 
138 million, calculated based on the consolidated audited accounts for each 
of ZEAL and Lotto24 for the financial year ended 31 December 2017. 
 
The ZEAL Board expects that the cost synergy realisation will take place 
progressively, with approximately 80 percent of the total cost synergies 
achieved by the end of year one, rising to 100 percent achieved by the end 
of year two. 
 
*Revenue synergies and dis-synergies* 
 
For the Combined Group it is envisaged that there will be overall *net 
revenue dis-synergies of approximately EUR 107 million,* mainly caused by 
the business model change of ZEAL's myLotto24 subsidiary into a German 
licensed online lottery brokerage business. 
This represents the loss of approximately 67% of the Combined Group's 
revenue of EUR 160 million, calculated based on the consolidated audited 
accounts for each of ZEAL and Lotto24 for the financial year ended 31 
December 2017. 
 
The revenue synergies and dis-synergies will principally comprise: 
 
a) *Business model-related revenue dis-synergies of EUR 120 million *will be 
generated mainly from: 
 
=- billings loss: An overall billings loss due to the customer loss which 
will be caused by the transition into an online brokerage business, and 

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