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Australian online lottery company Jumbo Interactive (ASX JIN) has entered into an agreement to acquire UK lottery company Gatherwell for $9.1 million.
Gatherwell was founded in Oxford in 2013 as a lottery company to support local causes and schools across the UK.
The UK company currently has around 80 local authorities and 1,000 schools as customers, spread across around 5,000 causes and selling around 130,000 lottery tickets per week.
In comparison to the UK national lottery, these smaller scale lotteries are popular with the public because of their support of local causes.
Jumbo - one of the companies featured in this year's Brisbane Top Companies list - will pay $5.4 million in cash on acquisition for the UK business, with further payments of $3.7 million payable if certain revenue and profit targets are met by Gatherwell.
Jumbo founder and CEO Mike Veverka says the acquisition will accelerate the company's expansion of its software as a service (SaaS) business in the UK.
"This is an important step in building the SaaS Powered By Jumbo business segment, and in achieving our vision of $1 billion of ticket sales through the Jumbo platform by 2022," says Veverka.
Veverka and Jumbo CFO David Todd will join current Gatherwell directors Ben Speare and Martin Woodhead on the board of the UK company post-acquisition.
There has been a significant increase in the number of local authorities promoting lotteries to raise funds to support their purpose in the UK and Gatherwell is currently the only fully licenced External Lottery Manager offering a digital solution for these local authorities to run their lotteries.
Changes to legislation governing the size limits of these types of lotteries run by Gatherwell are set to come in soon, which Veverka hopes to take full advantage of.
"The acquisition will have an immediate positive impact on our business through an increase in revenue and profits, as well as placing Jumbo in the best possible position to take advantage of the opportunities in the UK charity lotteries," says Veverka.
"There is significant growth potential for Gatherwell based on their 'first-mover' competitive advantage, the industry growth of approximately 14 per cent, less than 1 per cent by value of the registered charities in the UK operate a lottery, and recent changes to the regulations."
"Jumbo can benefit by using Gatherwell to licence its Powered By Jumbo software and services to larger lotteries in the UK and possibly adapt the Gatherwell business model in other international markets such as Australia and Canada."
Jumbo has been on the cutting-edge of lottery technology since it was founded in 1999.
The company sold its first lottery ticket online in 2000 and has since launched an iPhone lottery app and more recently Lotto Party which is designed to promote social group play of the lottery.
The group entered into the SaaS market in November 2018, signing its first customer to use its "Powered by Jumbo" lottery software.
The company was recently named number 15 in Business News Australia's Brisbane's Top Companies 2019 list.
Shares in Jumbo are up 11.96 per cent to $22.74 per share at 11.16am AEDT.
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