The Jumbo Interactive Ltd (ASX: JIN) share price is up 9% or $1.84 to $22.14 today after it revealed the ₤3.0 million (~A$5.4 million) acquisition of UK lottery merchant Gatherwell.
“Gatherwell is a successful UK-based external lottery manager and will accelerate Jumbo’s expansion of the Software as a Service business in the UK”, said Mr Mike Veverka, CEO of Jumbo Interactive Limited.
Garthwell is currently a niche ‘good causes’ lottery provider in only running lotteries for local authorities and schools across the UK, with about 80 and 1,000 signed up respectively signed up. It reportedly sells around 130,000 tickets per week.
The acquisition will also require regulatory approval in what is a heavily regulated UK market given the associations around ‘problem gambling’ it’s tough to obtain any sort of material lottery operator license in the UK.
The UK’s National Lottery that has operated since 1993 was one of the world’s first and has been operated by state-franchised private operator Camelot ever since. The statute enacting it imposes strict conditions including that a certain amount of profits must be distributed to charitable causes.
Camelots operates a number of weekly draws and scratch card type tickets online and over the counter in a similar style to Jumbo’s Oz Lotto, but I don’t expect today’s acquisition will buy Jumbo a ticket into the regulated UK lottery market.
The acquisition is expected to add $1.5 million in net profit after tax (NPAT) for the 12 months to June 30 2021, with the deal priced on 6.2x to 7.8x Garthwell’s expected NPAT in fiscal 2021.
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Tom Richardson owns shares of Dicker Data Limited.
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The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of and recommends Jumbo Interactive Limited. The Motley Fool Australia owns shares of and has recommended Dicker Data Limited. The Motley Fool Australia has recommended Jumbo Interactive Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.