Blog: Zeal and Lottoland make their case on the Lotto24 deal

Zeal’s deal to acquire online lottery brokerage firm Lotto24 and pivot away from lottery betting in Germany was thrown into the spotlight yesterday when Lottoland CEO Nigel Birrell published an open letter opposing the acquisition and requested that Zeal shareholders do the same.

Birrell, writing as a shareholder in Zeal, posed nine critical questions in the letter and demanded answers from Zeal management duo Dr Helmut Becker and Jonas Mattsson.

Zeal has said the Lotto24 acquisition would “de-risk its business model” as the legal case against lottery betting operators in Germany intensifies but Birrell argues the company has not considered all options available and does not have the best interests of minority shareholders at heart.

However, a Zeal source close to the deal told EGR: “The reality is that this is mischief-making. The letter in some ways is flattering because they see the deal as a threat that needs to be derailed.

“Their letter disguises the real fear which is that this deal will be successful. Lottoland has had seven weeks to come up with a response and they only made their feelings known yesterday– they are supposed to be a fast-moving company.”

Zeal CEO Dr Helmut Becker said similar in an official statement this morning: “We firmly believe that, of the alternatives we have considered, our proposal to reunite Zeal and Lotto24 has the strongest strategic rationale, offers the best opportunity for sustainable growth and creates the most value for Zeal’s shareholders.

“Strong opposition from a competing secondary lottery operator is clear and compelling evidence that our transaction is the best way forward for our company and our shareholders.”

But Lottoland CEO Birrell believes that by deciding not to sell its soon-to-be defunct lottery betting arm in Germany, Zeal shareholders are missing out on lost value.

In his letter, Birrell hinted at buying Zeal’s lottery betting business by making an Alternative Transaction offer for “certain assets of the company” and has called for Zeal to delay its general meeting, scheduled for 18 January, until Lottoland publishes its counter offer by 31 January.

“The only way to stop the deal is to convince Zeal shareholders that this isn’t a good deal for them,” Birrell told EGR Intel.

“It looks like a good deal for Lotto24 shareholders and not a very good deal for Zeal shareholders, so we are trying to urge them to rethink and we have been contacted by a number of shareholders already.

“We are very serious about it but these things take time to put together. We don’t believe the Zeal board has acted in the best interests of shareholders by looking at all of the options.

“If you were thinking of discontinuing a business line, why would you not offer that business to your competitors who may be able to pay a nice sum for it? Certainly we were never approached.

“If the general meeting goes ahead and they get the votes to get it through then that is the end of the story.

“We want them to postpone the general meeting, hear our proposals and then assess those proposals alongside the deal to buy Lotto24 and then decide after that,” he added.