It has been a year since Chinese authorities suspended online lottery sales to clean up the once black market. While it’s still uncertain when the halt will be lifted, domestic internet giants are taking a more upbeat view of the industry’s growth in China.
Alibaba, the Chinese e-commerce behemoth poised to expand into entertainment, online health and securities, is spearheading a foray into a new industry: lottery. Hong Kong-listed lottery service company AGTech announced today that they have entered into an subscription agreement with a company in which Alibaba holds 60 percent and Alibaba’s financial affiliate Ant Financial owns the remaining 40 percent.
Under the deal, the Alibaba-backed company is going to hold a 59.5 percent stake in AGTech in exchange for 2.4 billion HKD (about $300 million USD) at $0.35 HKD a sare, much lower than the company’s market price of $1.99 HKD per share (at closing price on March 5). The market cap of AGTech is nearly 10 billion HKD as of the same date.
The transaction between the two has a lot of strategic significance. After the deal, AGTech will become Alibaba and Ant Financial’s primary partner in running their lottery-related businesses. They will also be their sole partner in applying for a state lottery operation license, the operation of lottery software and hardware and the maintenance of sales channels and websites.
Founded in 2007, AGTech is principally engaged in gaming technologies (game software, systems, hardware and terminals); online and mobile lottery; and lottery management.
“China’s lottery market has great business potentials” an Alibaba spokesperson told state media. “We believe the investment will enable us to gain a upper hand in the market and to dig out the potentials of this market. Our experiences and resources in e-commerce, cloud computing and big data will help AGTech for better development.”
The country’s online lottery sales surged to a record-high of 382.3 billionRMB (US$61 billion) in 2014, up 23.6 percent year-on-year, according to the China Sports Lottery Administration Center.
Image credit: Alibaba