REG-ZEAL Network SE ZEAL Network SE announces takeover offer for Germany's largest private digital lottery broker Lotto24 AG

ZEAL Network SEAnnouncement

19/11/2018 07:35

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   ZEAL Network SE (-)
   ZEAL Network SE announces takeover offer for Germany's largest private
   digital lottery broker Lotto24 AG

   19-Nov-2018 / 08:30 CET/CEST
   Dissemination of a Regulatory Announcement, transmitted by EQS Group.
   The issuer is solely responsible for the content of this announcement.

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   NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION (IN WHOLE OR IN PART)
   DIRECTLY OR INDIRECTLY IN, INTO OR FROM THE UNITED STATES OF AMERICA OR
   ANY OTHER JURISDICTION WHERE TO DO SO WOULD CONSTITUTE A VIOLATION OF THE
   RELEVANT LAWS OF SUCH JURISDICTION.

   Press release

   ZEAL Network SE announces takeover offer for Germany's largest private
   digital lottery broker Lotto24 AG

     • The transaction will create a digital lottery group with currently
       more than 5 million combined customers globally, current combined
       billings of about EUR 500 million, and a diverse international
       footprint
        
     • The combined group will build on the existing position of Lotto24,
       discontinue the German secondary lottery business of Tipp24 and
       transform it to a locally licensed online broker. The companies
       jointly aim to accelerate growth of online brokerage in the EUR 8.7
       billion German lottery market
        
     • The all-share takeover delivers significant benefits for shareholders
       with expected cost synergies of EUR 57 million per year, strong future
       cash generation, and a reduced risk profile
        
     • The transaction strengthens the German lottery market and returns to
       federal states and their lottery beneficiaries
        
     • ZEAL expects to offer one new ZEAL share for ca. 1.6 Lotto24 shares,
       reflecting the ratio of the volume-weighted average prices of ZEAL and
       Lotto24 shares over the past three months
        
     • ZEAL has secured irrevocable commitments to accept the offer from
       major shareholders representing approximately 65% of Lotto24 shares

   (London, 19 November 2018)

   ZEAL Network SE ('ZEAL') today announced an all-share voluntary takeover
   offer for Germany's largest private digital lottery broker, Lotto24 AG
   ('Lotto24'). On completion, the transaction will create a digital lottery
   group with currently more than 5 million combined customers globally,
   current combined billings of about EUR 500 million, and a diverse
   international footprint.

   In the context of the deal, and consistent with its renewed strategy to
   de-risk its business model and focus on locally-licensed businesses, ZEAL
   intends to transform its German secondary lottery business into a locally
   licensed online brokerage model after reacquiring control of its myLotto24
   and Tipp24 subsidiaries and, in due course, to relocate ZEAL to Germany.
   The transaction will significantly strengthen the German lottery market
   and expand returns to federal states and their lottery beneficiaries.

   A strong platform for accelerated growth and shareholder value creation

   The transaction combines the strong balance sheet, high-quality loyal
   customer base, and technological capabilities of ZEAL with the proven
   expertise of Lotto24 in the German lottery brokerage market. The enlarged
   Group will be in a unique position to accelerate online brokerage growth
   in the German lottery market.

   The Group will also continue to pursue its international growth ambitions,
   building on the existing, diverse international portfolio (UK, Ireland,
   Spain, Norway, and Netherlands) and global development pipeline of ZEAL,
   with the aim of creating long-term growth and sustained shareholder and
   customer value.

   ZEAL believes that the change to its business model in Germany will
   deliver significant benefits to ZEAL shareholders in the medium term as a
   result of reduced operational, tax and regulatory risk as well as improved
   growth potential. As part of the business model change, ZEAL has taken the
   decision to discontinue certain products and to focus on less volatile
   brokerage income in the German market, resulting in net annual run-rate
   revenue dis-synergies of ca. EUR 107 million, which is expected to be
   compensated for over time through accelerated growth of the enlarged
   Group. The combination with Lotto24 is also expected to deliver annual
   run-rate cost synergies of c. EUR 57 million through greater platform
   efficiencies and significant reductions in other operational costs.
   Further details of these revenue dis-synergies and cost savings are set
   out in Appendix A to this announcement.

   In addition, ZEAL management has identified further cost savings of
   approximately EUR 4 million, which do not arise as a consequence of the
   transaction and sees additional potential future upside.

   Dr Helmut Becker, CEO of ZEAL, said: 'ZEAL will reunite with Germany's
   largest digital lottery broker. We will have a significantly enlarged,
   loyal customer base, strong technology and marketing platforms, and an
   exceptionally experienced team. Together with our plans to regain control
   of Tipp24 and transform its German business models, this puts us in an
   excellent position to accelerate online growth in both the EUR 8.7 billion
   German lottery market and EUR 270 billion global lottery sector - as a
   locally-licensed broker, licensed operator, and lottery investor. This
   transaction is good for shareholders, good for customers, and good for the
   German federal states and their lottery beneficiaries. We have held
   initial, constructive conversations with Lotto24 and look forward to
   further engaging with the management to achieve a successful combination
   of the businesses. We also look forward to a successful and constructive
   cooperation with Germany's state lotteries and invite all shareholders to
   join us on this journey.'

   Since its IPO on the Frankfurt Stock Exchange in 2012, Lotto24 has grown
   rapidly. In 2017, Lotto24 generated billings of EUR 220.7 million and
   revenues of EUR 25.2 million. In October 2018, Lotto24 upgraded its full
   year guidance, anticipating billings' growth of between 38% and 43% for
   2018. In the first nine months of 2018, the company increased billings by
   43% to EUR 235.9 million, revenues grew almost 50% to EUR 28.1 million,
   and the total number of registered customers rose by 36% to 2.04 million.

   ZEAL has nearly two decades' experience as an online lottery operator,
   reseller and investor. In 2017, ZEAL delivered billings of EUR 280.5
   million and revenues of EUR 134.3 million. In the first nine months of
   2018, billings increased 5% to EUR 212.4 million, revenues rose by 19% to
   EUR 111.2 million, and the number of new customers grew by 54%, taking the
   total number of registered customers of the Group to more than 3.5
   million.

   Transaction supported by major Lotto24 shareholders
   ZEAL will offer Lotto24 shareholders the opportunity to exchange their
   Lotto24 shares for shares in ZEAL. The offer consideration will reflect
   the ratio of the volume-weighted average share prices of both Lotto24 and
   ZEAL over the past three months before announcement of the transaction.
   Subject to the final determination of the minimum prices required by law
   and the final terms set forth in the offer document, ZEAL intends to offer
   one new ZEAL share as consideration in exchange for each ca. 1.6 tendered
   shares of Lotto24. Independently of the offer, ZEAL expects to pay an
   ordinary interim dividend of EUR 1.00 by year-end 2018.

   In a clear statement of shareholder support for the deal, ZEAL today
   entered into irrevocable tender agreements with major shareholders of
   Lotto24, namely with Günther Group, Working Capital and Jens Schumann.
   They represent approximately 65% of the shares and voting rights in
   Lotto24. By entering into the tender agreements, these shareholders have
   undertaken to tender their shares in Lotto24 into the offer.

   Jonas Mattsson, Chief Financial Officer of ZEAL: 'We believe this deal
   creates significant value for ZEAL and Lotto24 shareholders. The future
   growth prospects, significant reduction of regulatory risk and the related
   uncertainties, and EUR 57 million of annual cost synergies make the
   combined group a highly attractive long-term investment proposition. With
   our shared history, we are confident of achieving a seamless integration
   of both companies. We encourage all holders of Lotto24 and ZEAL shares to
   follow the major shareholders and take part in the offer.'

   The offer will be made in accordance with the conditions to be set forth
   in the offer document, among others a minimum acceptance rate of 50% plus
   one share of Lotto24. Further details of the offer and its terms,
   including the acceptance period, will be contained in the offer document.
   ZEAL expects that the offer document will be published on the website
   www.zeal-offer.com at the beginning of 2019.

   An extraordinary general meeting of ZEAL is expected to be held at the end
   of December 2018, at which ZEAL will ask its shareholders to approve the
   offer, including the acquisition of Lotto24 shares from certain members of
   the Supervisory Board of ZEAL or persons connected with them, and
   authorise the Executive Board to allot a number of shares as required to
   fund the offer. As Günther Group has made it a condition to its tender
   agreement with ZEAL that it will not, as a consequence of the offer, be
   subject to a legal obligation to make a general offer for the shares in
   ZEAL which it does not own at that time, ZEAL will furthermore propose a
   resolution to its shareholders (other than Günther Group and persons
   acting in concert with Günther Group) to approve the waiver of such
   obligation granted by the Panel on Takeovers and Mergers. The ZEAL
   shareholder approvals will be a condition for ZEAL to publish the offer
   document.

   Discussions with the German gambling regulatory body about the future
   licensing arrangements for the enlarged Group have already been initiated.
   ZEAL expects to complete the transaction in the first half of 2019.

   Updated ZEAL Profit Guidance

   As previously announced today, the Executive Board has decided to adjust
   the upper end of the ZEAL Group EBIT forecast range for the financial year
   2018. The Executive Board now anticipates EBIT in the range of EUR 33
   million to EUR 38 million (previously EUR 33 million to EUR 43 million).
   The adjustment includes the impact of the transaction costs in connection
   with the announced intention of ZEAL to make a public takeover offer for
   Lotto24 AG as well as restructuring expenses in connection with an
   internal cost savings programme initiated today.

   Except for the narrowing of the previously forecasted EBIT range, the
   Executive Board confirms its previously published guidance and expects the
   ZEAL Group to generate Total Operating Performance (TOP) of EUR 150
   million to EUR 160 million in the financial year 2018.

   ENDS

   Additional information

   ZEAL invites media, investors and analysts to two separate webcasts and
   conference calls today to present the rationale and details of the
   transaction. The webcasts will be hosted in English by Dr Helmut Becker,
   CEO and Jonas Mattsson, CFO of ZEAL.

   ZEAL Network SE Media Webcast and Conference Call:

   Date: Today, 19 November 2018, 11.15 am CET / 10.15 am GMT
   ConferenceCall dial-ins
   Germany: +49 69 201744210
   UK: +44 2030092470
   USA: +1 8774230830
   Confirmation code: 46065908#
   Audio-Webcast: https://webcasts.eqs.com/zeal2420181119media
   A replay of the webcast will be available under the same link after
   conclusion of the conference call.

   ZEAL Network SE Investor and Analyst Webcast and Conference Call:

   Date: Today, 19 November 2018, 12.00 pm CET / 11.00 am GMT
   Conference Call dial-ins
   Germany: +49 69 201744210
   UK: +44 2030092470
   USA: +1 8774230830
   Confirmation code: 70491804#
   Audio-Webcast: https://webcasts.eqs.com/zeal20181119investors
   A replay of the webcast will be available under the same link after
   conclusion of the conference call.

   Press contact:
   ZEAL Network
   Matt Drage
   Head of Corporate Communications
   T: +44 (0)7976 872 861
    1 matt.drage@zeal-network.co.uk

   ZEAL Network
   Frank Hoffmann
   Investor Relations Manager
   +44 (0) 20 3739 7123
    2 frank.hoffmann@zeal-network.co.uk

   FTI Consulting
   Lutz Golsch
   T: +49 69 920 37 110
   M: +49 173 6517710
    3 Lutz.Golsch@fticonsulting.com

   Important note
   This announcement is for information purposes only and neither constitutes
   an offer to purchase or exchange nor an invitation to sell or to make an
   offer to exchange, securities of Lotto24 AG ('Lotto24') or ZEAL Network SE
   ('ZEAL'). The final terms and further provisions regarding the public
   takeover offer will be disclosed in the offer document once its
   publication will have been approved by the German Federal Financial
   Supervisory Authority (Bundesanstalt für Finanzdienstleistungsaufsicht).
   ZEAL reserves the right to deviate in the final terms and conditions of
   the public takeover offer from the basic information described herein.
   Investors and holders of securities of Lotto24 are strongly recommended to
   read the offer document and all announcements in connection with the
   public takeover offer as soon as they are published, as they contain or
   will contain important information.

   The offer will be made exclusively under the laws of the Federal Republic
   of Germany, in particular under the German Securities Acquisition and
   Takeover Act (Wertpapiererwerbs- und Übernahmegesetz (WpÜG)). The offer
   will not be made pursuant to the provisions of jurisdictions other than
   those of the Federal Republic of Germany. Therefore, no other
   announcements, registrations, admissions or approvals of the offer outside
   of the Federal Republic of Germany have been filed, arranged for or
   granted.

   The ZEAL shares have not been and will not be registered under the U.S.
   Securities Act of 1933, as amended, or with any securities regulatory
   authority of any state or any other jurisdiction of the United States of
   America ('USA'). Therefore, subject to certain exceptions, ZEAL shares may
   not be offered or sold within the USA or in any other jurisdiction where
   to do so would be a violation of applicable law. There is no public
   offering of ZEAL shares in the USA.

   To the extent this announcement contains forward-looking statements, such
   statements do not represent facts. Forward-looking statements include all
   matters that are not historical facts. They are characterised by the words
   'expect', 'believe', 'estimate', 'intend', 'aim', 'assume', 'plan' or
   similar expressions. Such statements express the intentions, opinions or
   current expectations and assumptions of ZEAL and the persons acting in
   conjunction with ZEAL, for example with regard to the potential
   consequences of the takeover offer for Lotto24, for those shareholders of
   Lotto24 who choose not to accept the takeover offer or for future
   financial results of Lotto24. Such forward-looking statements are based on
   current plans, estimates and forecasts which ZEAL and the persons acting
   in conjunction with it have made to the best of their knowledge, but which
   do not claim to be correct in the future. Forward-looking statements are
   subject to risks and uncertainties that are difficult to predict and
   usually cannot be influenced by ZEAL or the persons acting in conjunction
   with it. Actual events or consequences may differ materially from those
   contained in or expressed by such forward-looking statements.

   This release and any materials distributed in connection with this release
   are not directed to or intended for release, publication or distribution
   (in whole or in part) directly or indirectly into or from the USA or any
   other jurisdiction where to do so would constitute a violation of the
   relevant laws of such jurisdiction, nor are they directed to, or intended
   for use by, any person or entity that is a citizen or resident or located
   in the USA or in any locality, state, country or other jurisdiction where
   such release, distribution, publication, availability or use would
   constitute a violation of the relevant laws of such jurisdiction or which
   would require any registration or licensing within such jurisdiction.

   Lazard & Co., Limited ('Lazard'), which is authorised and regulated in the
   United Kingdom by the Financial Conduct Authority, is acting exclusively
   for ZEAL Network SE and no one else in connection with the proposals
   referred to in this document. Lazard will not be responsible to anyone
   other than ZEAL Network SE for providing the protections afforded to
   clients of Lazard nor for providing advice in relation to any of the
   matters referred to or contemplated in this document. Neither Lazard nor
   any of its affiliates owes or accepts any duty, liability or
   responsibility whatsoever (whether direct or indirect, whether in
   contract, in tort, under statute or otherwise) to any person who is not a
   client of Lazard in connection with this document, any statement or report
   contained herein, any of the matters referred to or contemplated in this
   document or otherwise.

   Appendix A

   QUANTIFIED FINANCIAL BENEFITS STATEMENT

   Part A

   This Announcement contains statements of estimated cost savings, revenue
   synergies and dis-synergies arising from the Combination (together, the
   'Quantified Financial Benefits Statement').

   A copy of the Quantified Financial Benefits Statement is set out below.

   'The Executive Board of ZEAL (the 'ZEAL Board') believes the following:

   Cost synergies

   The quantified recurring pre-tax cost synergies expected to result from
   the Combination principally arise from:

   a) Business model change (non-personnel costs): Savings in direct costs of
   operations account for around 60 percent of the overall cost synergies:

   -- all costs covering the bookmaking risks for the German market (hedging
   costs) will not be required after the transformation to an online
   brokerage business;
   -- reduction of non-deductible VAT within the myLotto24 sub-group.

   b) Organisational efficiency: Reduction of personnel and other operating
   expenses within the Combined Group, which represents around 40 percent of
   the overall cost synergies and will arise from:

   -- removing business related duplicated roles enabled by the migration of
   the German broker businesses of the Combined Group onto one technology
   platform;
   -- removing duplication of central functions roles;
   -- removing duplicates in senior management structure;
   -- rationalisation of the Combined Group's locations;
   -- removing roles related to hedging activities; and
   -- reduction of consultancy expenses / professional fees based on
   de-duplication and changed requirements due to business model change.

   The total anticipated cost synergies of EUR 57 million per annum are
   equivalent to approximately 41 percent of the Combined Group operating
   expenses (including personnel expenses) from continuing operations of EUR
   138 million, calculated based on the consolidated audited accounts for
   each of ZEAL and Lotto24 for the financial year ended 31 December 2017.

   The ZEAL Board expects that the cost synergy realisation will take place
   progressively, with approximately 80 percent of the total cost synergies
   achieved by the end of year one, rising to 100 percent achieved by the end
   of year two.

   Revenue synergies and dis-synergies

   For the Combined Group it is envisaged that there will be overall net
   revenue dis-synergies of approximately EUR 107 million, mainly caused by
   the business model change of ZEAL's myLotto24 subsidiary into a German
   licensed online lottery brokerage business.
   This represents the loss of approximately 67% of the Combined Group's
   revenue of EUR 160 million, calculated based on the consolidated audited
   accounts for each of ZEAL and Lotto24 for the financial year ended 31
   December 2017.

   The revenue synergies and dis-synergies will principally comprise:

   a) Business model-related revenue dis-synergies of EUR 120 million will be
   generated mainly from:

   -- billings loss: An overall billings loss due to the customer loss which
   will be caused by the transition into an online brokerage business, and
   reduced average billings per user, due to the restriction to the DLTB
   product portfolio; and
   -- margin reduction: A reduction in the margin applied to the Group's
   reduced billings, as a result of the lower margin of an online brokerage
   business, relative to the higher margin enjoyed by ZEAL's current
   secondary lottery business.

   b) Revenue synergies of EUR 13 million: The revenue dis-synergies will be
   offset to some extent by increased billings generated by the Combined
   Group mainly arising from:

   -- reduced customer acquisition costs due to improved access to and
   optimization of marketing channels within the Combined Group, which leads
   to more newly registered & active customers; and
   -- decreased legal restrictions and improved customer quality, leading to
   a higher number of active customers and / or higher average spend per
   user.

   The ZEAL Board expects the transformation of the business model to be
   implemented within the first full year following completion. Revenue
   dis-synergies will take effect at the same time as the business model
   change with a full run-rate by the end of year one following completion of
   the Combination.

   The revenue synergies realisation will take place progressively, with
   approximately 40 percent of the total revenue synergies achieved by the
   end of year one, approximately 70 percent achieved by the end of year two
   and with full the run-rate effect achieved by the end of year three after
   the completion of the Combination.

   Costs to achieve

   The ZEAL Board expects that implementation of the business model change
   and realisation of the cost and revenue synergies would result in total
   non-recurring costs in the range of approximately EUR 15 million to EUR 20
   million incurred within the first two years following Completion. These
   costs consist mainly of employee restructuring costs and IT migration
   costs.'

   Bases of belief for the Quantified Financial Benefits Statement

   Following initial discussions regarding the Combination, a synergy
   development team was established at ZEAL to evaluate and assess the
   potential synergies available from the Combination.

   The team, which comprised senior strategy, financial, technology and
   business personnel at ZEAL, worked to identify and quantify potential
   synergies as well as estimate any associated costs. The team engaged with
   the relevant functional heads and other personnel at ZEAL to provide input
   into the development process and to agree on the nature and quantum of the
   identified synergy initiatives.

   In preparing the Quantified Financial Benefits Statement and to estimate
   the merger benefits relating to the Combination, the ZEAL Board has made
   use of publicly available information about Lotto24 along with knowledge
   it continues to have from the period prior to Lotto24's spin-off from ZEAL
   in 2012 and as a result of the separation of the technology platform in
   2015. In circumstances where data has been limited for commercial or other
   reasons, the team has made estimates and assumptions to aid the
   development of individual synergy initiatives. ZEAL did not have access to
   the Lotto24 senior management or any current non-public information about
   Lotto24 and its business during the preparation of the Quantified
   Financial Benefits Statement.

   The bases used for the quantified exercises are:

   -- ZEAL: Full year 2018 P&L forecast data from ZEAL's financial planning
   contains 6 months actuals and 6 months forecast. Revenues and resultant
   synergies / dis-synergies are based on normalised revenue, which has been
   adjusted to match the statistically expected prize pay-out ratio;
   -- Lotto24: Rolling 12 months actual P&L data for the period July 2017 to
   June 2018 has been used as a baseline, as no full year 2018 forecast is
   publicly available.

   In arriving at the estimate of synergies set out in this document, the
   ZEAL Board made the following operational assumptions:

   -- the Combined Group will migrate the two broker businesses onto one
   technology platform;
   -- policies and procedures will be harmonised according to best practices
   at ZEAL and Lotto24; and
   -- the Combined Group will, wherever possible, utilise existing resource
   and capabilities within ZEAL and Lotto24 to deliver the revenue synergies.

   The ZEAL Board has, in addition, made the following assumptions, all of
   which are outside its control:

   -- a license and / or license extension will be granted to the Combined
   Group to enable the transformation of the myLotto24 sub group's German
   secondary lottery business into a licensed private online brokerage
   business;
   -- there will be no change to macroeconomic, political, regulatory or
   legal conditions in the markets or regions in which Lotto24 and ZEAL
   operate that materially impact the implementation or costs to achieve the
   proposed cost and revenue synergies;
   -- there will be no material change in current foreign exchange rates; and
   -- there will be no change in tax legislation or tax rates or other
   legislation or regulation in the countries in which Lotto24 and ZEAL
   operate that could materially impact the ability to achieve any benefits.

   The assessment and quantification of the potential synergies have in turn
   been informed by ZEAL management's industry experience as well as their
   experience of executing and integrating past acquisitions.

   Further synergies and savings not contingent on the Combination and
   separate to the Quantified Financial Benefits Statement

   Separately, ZEAL plans to achieve, and has already started to implement
   recurring cost savings of approximately EUR 4 million per annum as a
   result of an internal cost saving initiative, which will be delivered by
   end of 2018. These additional cost savings are not contingent on the
   Combination and so do not form part of the Quantified Financial Benefits
   Statement.
   Furthermore, the ZEAL Board believes that additional synergy opportunities
   in revenue and costs can be achieved related to the Combination, which are
   not quantified as part of this Quantified Financial Benefits Statement.

   Reports

   As required by Rule 28.1(a) of the Takeover Code, Ernst & Young, as
   reporting accountants to ZEAL, and Lazard, as financial advisers to ZEAL,
   have provided the opinions required under that Rule. Copies of these
   reports are included at Parts B and C of this Appendix A. Each of Ernst &
   Young and Lazard has given and not withdrawn its consent to the
   publication of its report in this Announcement in the form and context in
   which it is included.

   Notes

   The Quantified Financial Benefits Statement relates to future actions and
   circumstances which, by their nature, involve risks, uncertainties and
   contingencies. As a result, the cost savings and synergies referred to may
   not be achieved, or may be achieved later or sooner than estimated, or
   those achieved could be materially different from those estimated.
   Due to the scale of the Combined Group, there may be additional changes to
   the Combined Group's operations. As a result, and given the fact that the
   changes relate to the future, the resulting synergies may be materially
   greater or less than those estimated.

   No statement should be construed as a profit forecast or interpreted to
   mean that the Combined Group's earnings in the first full year following
   implementation of the Combination, or in any subsequent period, would
   necessarily match or be greater than or be less than those of ZEAL and /
   or Lotto24 for the relevant preceding financial period or any other
   period.

   Part B
   Report from Ernst & Young

   The Directors
   ZEAL Network SE
   5th Floor -- One New Change
   London
   EC4M 9AF

   Lazard & Co. Limited
   50 Stratton Street
   London
   W1J 8LL

   19 November 2018

   Dear Sirs

   We refer to the statement regarding the estimate of expected merger
   benefits statement ('the Statement') made by ZEAL Network SE ('the
   Company'). The Statement, including the relevant bases of belief
   (including sources of information) is set out in Appendix A of the initial
   announcement of the proposed Offer in compliance with the Takeover Code
   (the 'Announcement') issued by the Company dated 19 November 2018. This
   report is required by Rule 28.1(a)(i) of The City Code on Takeovers and
   Mergers (the 'City Code') and is given for the purpose of complying with
   that rule and for no other purpose.

   Save for any responsibility that we may have to those persons to whom this
   report is expressly addressed, to the fullest extent permitted by law we
   do not assume any responsibility and will not accept any liability to any
   other person for any loss suffered by any such other person as a result
   of, arising out of, or in connection with, this report or our statement,
   required by and given solely for the purposes of complying with Rule 23.2
   of the City Code by consenting to its inclusion in the Announcement.

   Responsibility

   It is the responsibility of the directors of the Company ('the Directors')
   to prepare the Statement in accordance with the requirements of the City
   Code.

   It is our responsibility to form an opinion as required by the Code as to
   the proper compilation of the Statement and to report that opinion to you.

   It is the responsibility of Lazard & Co. Limited to form an opinion as
   required by, and solely for the purpose of Rule 28.1(a)(ii) of the City
   Code as to whether the Statement has been prepared with due care and
   consideration and to report that opinion to you.

   Basis of opinion

   We conducted our work in accordance with Standards for Investment
   Reporting 1000 (Investment Reporting Standards applicable to all
   engagements in connection with an investment circular) issued by the
   Auditing Practices Board in the United Kingdom. We have discussed the
   Statement together with the relevant bases of belief (including sources of
   information) with the Directors and with Lazard & Co. Limited. Our work
   did not involve any independent examination of any of the financial or
   other information underlying the Statement.

   We do not express any opinion as to the achievability of the cost and
   revenue synergies, as well as the revenue dis-synergies identified by the
   Directors.

   Our work has not been carried out in accordance with auditing or other
   standards and practices generally accepted in other jurisdictions and
   accordingly should not be relied upon as if it had been carried out in
   accordance with those standards and practices.

   Opinion

   In our opinion, the Statement has been properly compiled on the basis
   stated.

   Yours faithfully
   Ernst & Young LLP

   Part C
   Report from Lazard

   The Executive Board
   ZEAL Network SE
   5th Floor -- One New Change
   London EC4M 9AF
   United Kingdom

   19 November 2018

   Dear Sirs,

   Intended public takeover offer for Lotto24 AG by ZEAL Network SE ('ZEAL'
   or the 'Company')

   We refer to the ZEAL Quantified Financial Benefits Statement, the bases of
   belief thereof and the notes thereto (together, the 'Statement') as set
   out in Part A of Appendix A of this announcement, for which the Directors
   of ZEAL (the 'Directors' or 'you') are solely responsible under Rule 28 of
   the City Code on Takeovers and Mergers (the 'City Code').

   We have discussed the Statement (including the assumptions and sources of
   information referred to therein), with the Directors and those officers
   and employees of ZEAL who developed the underlying plans to which the
   Statement relates. The Statement is subject to uncertainty as described in
   this announcement and our work did not involve an independent examination
   of any of the financial or other information underlying the Statement.

   You have confirmed to us that all financial and other information relevant
   to the Statement has been disclosed to us. We have relied upon the
   accuracy and completeness of all the financial and other information
   provided to us by, or on behalf of, ZEAL, or otherwise discussed with or
   reviewed by us, and we have assumed such accuracy and completeness for the
   purposes of providing this letter.
   We do not express any opinion as to the achievability of the quantified
   financial benefits identified in the Statement.

   We have also reviewed the work carried out by Ernst & Young LLP as
   auditors of the Company and reporting accountants whose responsibility it
   is to form an opinion as required by Rule 28.1(a)(i) of the City Code on
   Takeovers and Mergers that the Statement has been properly compiled on the
   basis stated and that the basis of accounting used is consistent with the
   Company's accounting policies and we have discussed with them the opinion
   set out in Part B of Appendix A of this announcement addressed to
   yourselves and ourselves on this matter.

   This letter is provided to you solely in connection with Rule 28.1(a)(ii)
   of the City Code and for no other purpose. We accept no responsibility to
   the Company or its shareholders or any person other than the Directors in
   respect of the contents of this letter. We are acting exclusively as
   financial adviser to the Company and no one else in connection with the
   transaction referenced above in connection with which the Statement has
   been produced and it was solely for the purpose of complying with Rule
   28.1(a)(ii) that you requested us to prepare this letter. No person other
   than the Directors can rely on the contents of this letter and
   accordingly, to the fullest extent permitted by law, we exclude all
   liability (whether in contract, tort or otherwise) to any other person in
   respect of this letter, its contents or the work undertaken in relation to
   this letter, or any of the results or conclusions that can be derived from
   this letter or any written or oral information provided in connection with
   this letter, and in relation to any loss suffered by any such person as a
   result of, or in connection with, this letter.

   On the basis of the foregoing, we consider that the Statement, for which
   you as the Directors are solely responsible, has been prepared with due
   care and consideration.

   Yours faithfully,

   For and on behalf of
   Lazard & Co., Limited

   Part D
   Definitions

   The following definitions apply throughout this Appendix A unless the
   context otherwise requires:

   'Announcement' -- the announcement of the Company on 19 November of its
   intention to make the Offer;

   'Combination' -- the proposed combination of the business of ZEAL and
   Lotto24 following successful completion of the Offer;

   'Combined Group' -- the Existing Group as enlarged by the acquisition of
   control of Lotto24 pursuant to the Offer;

   'Company' or 'ZEAL' -- ZEAL Network SE;

   'Completion' -- The completion of the Combination;

   'DLTB' -- Deutscher Lotto- und Totoblock, the German Association of State
   Lottery Companies;

   'Ernst & Young' -- Ernst & Young LLP;

   'Executive Board' -- the executive board of the Company, comprising, at
   the date of this document, Dr Helmut Becker (Chairman of the Executive
   Board) and Jonas Mattsson (Chief Financial Officer);

   'Existing Group' -- the Company, its subsidiaries and its subsidiary
   undertakings and associated undertakings whose results are fully
   consolidated into the Company's annual consolidated accounts, as at the
   date of this document;

   'Lazard' -- Lazard & Co., Limited, independent advisers to the Company;

   'Lotto24' -- Lotto24 AG;

   'myLotto24' -- myLotto24 Limited, an associated undertaking of the Company
   whose results are fully consolidated into the Company's annual
   consolidated accounts and which carries on business in the United Kingdom
   as a bookmaker;

   'Offer' -- the voluntary takeover offer pursuant to the German Takeover
   Act to be made by the Company to acquire all the issued shares of Lotto24;

   'Takeover Code' or 'Code' -- the City Code on Takeovers and Mergers.

   ══════════════════════════════════════════════════════════════════════════

   ISIN:          GB00BHD66J44
   Category Code: ACQ
   TIDM:          -
   LEI Code:      391200EIRBXU4TUMMQ46
   Sequence No.:  6582
   EQS News ID:   747799


    
   End of Announcement EQS News Service

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References

   Visible links
   1. mailto:matt.drage@zeal-network.co.uk
   2. mailto:frank.hoffman@zeal-network.co.uk
   3. mailto:Lutz.Golsch@fticonsulting.com


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