Czech billionaire bets on lotteries for growth

Czech billionaire bets on lotteries for growth

By Michael Kahn

PRAGUE (Reuters) – A Czech billionaire who turned a regional energy company into a global business empire after the fall of the Berlin Wall is now betting on selling lottery tickets in places like Chicago and London to drive international growth.

Karel Komarek, the second-richest Czech behind the widow of Petr Kellner and ahead of deal maker Daniel Kretinsky, is pushing lottery operator Allwyn as a flagship for his KKCG investment group, telling Reuters: “Growth in lottery-led entertainment is absolutely key to our wider group strategy.”

Allwyn is already Europe’s biggest lottery operator, running national schemes in Italy, Austria, Greece and elsewhere.

Two recent deals – to operate the UK national lottery and the U.S. state of Illinois lottery – have put Allwyn in sight of a bigger share of the global market, which is set to grow to $425 billion in 2028 from $283 billion in 2023, according to The Business Research Company’s Lottery Global Market Report 2024.

“We are always open to new opportunities – primarily in Europe and in the U.S. – particularly when we can lean on existing expertise from within the group to unlock growth potential,” Komarek, 55, said in an interview by email.

Allwyn has eclipsed KKCG’s energy businesses, generating revenue of 7.8 billion euros ($8.60 billion) in 2023, or roughly 70% of KKCG’s total revenue.

It took over as operator of the UK national lottery in February after winning a tender against incumbent Camelot, the sole operator since the UK scheme’s launch nearly 30 years ago. Industry sources said Allwyn’s technology offerings and plan to distribute a hefty chunk of profits to charitable causes helped secure the deal.

Rising disposable incomes and technology such as smartphone apps, QR codes and innovations to make lotteries more interactive are driving growth in a global market where International Game Technology (IGT), Scientific Games and Intralot are among the biggest players.

DIGITALIZATION TREND

Komarek used a $13,000 loan from his father to start a valves and piping business in the early 1990s in then Czechoslovakia before acquiring oil and gas exploration company Moravske Naftove Doly – a move that laid the foundation for his fortune. But it was his 2012 deal to take over bankrupt Czech lottery operator Sazka that propelled KKCG’s overseas expansion.

“It was clear that there was a lot of untapped potential and that we could replicate this approach internationally and use it as a platform from which to build,” said Komarek, whose net worth has tripled since 2020 to $9.5 billion, according to Forbes.

KKCG’s more recent interests include biomedicine and the group sees opportunities to push deeper into technology, real estate, energy and evolving industries including AI and Web3, Komarek told Reuters.

Allwyn aims to expand further in the $100 billion U.S. lottery market, its Chief Executive Robert Chvatal said.

Most U.S. states operate their own lotteries but Chvatal believes these entities will increasingly turn to private providers like Allwyn to generate more technology-fuelled profits.

Allwyn, which has not disclosed the value of any of its recent investments, also bought a majority stake in U.S. online lottery games supplier Instant Win Gaming in February.

“The digitalization trend in this sector is inevitable,” Chvatal told Reuters.

“We did not go and acquire the Illinois lottery because we only want to stay there for the next 20 years.”

In 2022 Allwyn cancelled a deal with blank-check firm Cohn Robbins Holdings Corp., citing volatile market conditions, that would have seen its shares list in New York at an enterprise value of $9.3 billion.

Chvatal ruled out an initial public offering for Allwyn for now, saying the company was well financed through bank loans and bonds.

“We have the size and the product to do an IPO but it doesn’t mean we have to do it,” he said. “The market and timing have to be right. An IPO is a distraction now.”

($1 = 0.9301 euros)

(Additional reporting by Jason Hovet and Jan Lopatka; Editing by Susan Fenton)