Lottoland Holdings has today made an offer in the region of €60m to €76m for the German business of Zeal Network – the constituent part of Zeal that the company hopes to expand with the proposed takeover of Lotto24.
The news comes at the end of a rollercoaster week for the respective boards and shareholders, during which the CEOs have take public potshots at one another in a series of open letters and press releases.
In short, Zeal wants to approve its takeover of Lotto24 at a shareholder meeting on January 18 but Lottoland – which holds a 4.01 per cent interest in Zeal – wants to see the meeting postponed so that it can make an alternative offer that is “in the interests of all shareholders”. The backstory can be found here.
While the need for the meeting to go ahead (or not) seems to hinge on legal arguments and interpretations, the reality was that until Lottoland actually tabled its “alternative transaction” there wasn’t really much to see (other than a public disagreement).
With a week to go before the scheduled shareholder meeting, Lottoland Holdings has today bid to take control of Zeal’s German business, operating as Tipp24.com. Such a deal would deliver a fatal blow to the Zeal/Lotto24 takeover.
Lottoland this morning reiterated that it believes the proposed deal for Zeal to buy Lotto24 “destroys value, makes no strategic or economic sense and will result in a massive loss of billings and a substantially lower margin (potentially even a negative margin) for the combined new group.”
Lottoland said that its offer “will at least equally achieve or enable [the] outcomes [of the Zeal/Lotto24 deal], likely exceed them, whilst also creating additional benefits for shareholders as outlined in Lottoland’s letter to the board”.
In the letter, signed by CEO Nigel Birrell and which can be viewed in full here, Lottoland considers Zeal’s German business to be worth “approximately €38m”.
However, the operator is offering considerably more. In summary:
(i) a minimum of €60m in cash (i.e. an implied 60 per cent premium to the assumed capital market valuation of the German business); and
(ii) a maximum of €76m in cash (i.e. an implied 100 per cent premium to the assumed capital market valuation of the German business).
“The proposed offer is superior financially, deliverable, subject to minimal conditionality and could be executed within a short time frame,” Lottoland said.
Zeal confirmed it has received “a non-binding, conditional and indicative offer from Lottoland Holdings for the purchase of assets of the Zeal Group representing the core of the German business as currently operating under the Tipp24 brand.”
The company said it will “duly assess the indicative offer and its potential implications”.
COMMENT: Zeal could not postpone its critical deal-sealing shareholder meeting because, it said, it had no alternative on the table and related legal implications (of a postponement) could result in a significant delay. Lottoland does not agree that such a delay is legally unavoidable and, in case, has now tabled what looks to be an offer that Zeal shareholders would likely want to consider. If Zeal holds its meeting, it now risks revolt from shareholders who can smell Lottoland cash.