Zeal CEO says stricter prize draws regulation would benefit its UK expansion 

Speaking on an investor call on 9 July, Zeal’s CEO Dr Stefan Tweraser insisted the company’s reputation as a heavily-regulated operator in Germany would be of benefit for its debut into the UK prize-draw sector, as he expects the vertical to become more regulated in the future.

Zeal’s acquisition of UK prize draw operator Seven Canyon, announced earlier this week, marked its first expansion outside of Germany. During its FY25 earnings call in March the company had hinted at plans to expand its prize draws offering and enter a new market.

Tweraser told analysts last week that the operator thrived in such a heavily regulated market as Germany, and he expected the UK would enforce stricter rules on prize draws in the fullness of time.

“We expect the UK price 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 said.

He added: “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.”

Today the UK sector operates outside of traditional lottery regulation, operating instead via a a voluntary code of conduct focused on enhanced player protection. The code was introduced in May.

“SevenCanyon was one of the big proponents and big drivers of that voluntary code of conduct,” Tweraser emphasised during the call.

The UK prize draw market is expected to grow signficantly. An April report on the sector by Rokker estimated Britain’s prize draw market now generates an estimated £1.3 billion in annual revenue, and attracts around 7.4 million active players.

Industry stakeholders have highlighted the lack of strict regulation as a benefit for new entrants and for traditional iGaming operators to enter the vertical.

Speaking to iGB in May Jamie Pinner, senior leader at DrawHouse, said: “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.” 

UK market entry and acquisition approach

Zeal characterised the acquisition as part of a strategic growth plan, not merely an opportunistic purchase. “[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,” said Tweraser.

Last year, SevenCanyon reported approximately £99 million in billings. When measured on a gross gaming revenue basis, which aligns more closely with Zeal’s reporting standards, the company generated around £30 million. 

“SevenCanyon is already a scaled, profitable and cash generating business with an EBITDA of more than £10 million in the most recent financial year,” Zeal CFO Andrea Behrendt added.

Zeal outlined several synergies from the acquisition. These included leveraging its own customer relationship management (CRM) capabilities and using its expertise in large-scale “dream house” raffles to accelerate SevenCanyon’s house prize draws.

Financial impact

The deal involved a cash consideration of £33.9 million payable at closing. This was alongside an earn-out of up to £4.8 million, which is contingent on meeting agreed performance targets within six months. 

Additional elements of the deal included SevenCanyon’s prize inventory, such as cars and cash. To finance the acquisition, Zeal arranged a €40 million loan from Deutsche Bank with a seven-year term, supplemented by a smaller intercompany loan.

“This [deal] increased our external debt to approximately €100 million, and our cash at bank is still very meaningful,” said Behrendt.

“You know that we are a strong cash-generating business, [with a] post-transaction of around €70 million.”

ZEAL projected that the acquisition would contribute positively to its EBITDA, pushing it up into the high single-digit million-euro range within the first full year of SevenCanyon sitting within the business.

Leadership and integration plans

The founders of SevenCanyon are expected to exit the business within six months of the deal’s completion, Tweraser told analysts. The operator appointed a successor from within the Zeal business.

“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,” the CEO said. 

The acquired business will operate as a semi-autonomous unit under Zeal’s “business owner” model, designed to maintain entrepreneurial spirit while benefiting from the wider company’s shared compliance, finance and technology support.