Alibaba Group Holding Ltd., known to be China’s biggest online retailer, announced today that it would purchase a majority stake in lottery supplier AGTech Holdings Ltd. through one of its affiliates.
Alibaba’s main financial affiliate Ali Fortune Investment Holding Ltd., in which it currently holds a 60% stake, would spend the amount of HK$2.39 billion ($308 million) in order to buy a majority stake in the lottery business. Of those, HK$1.68 billion would be spent on shares and HK$712.6 million would go for the purchase of convertible bonds. Once the transaction is completed, Alibaba will own a 59.45% stake in AGTech.
The purchase of AGTech shares will mark the popular online retailer’s return to the Chinese lottery market, after it suspended its lottery operations, following the introduction of stringent lottery regulations in February 2015.
The transaction will give AGTech, which currently runs operations in most Chinese provinces and two offline shops for the distribution and sale of various lottery games, the chance to further expand its presence and offering in the country. The company has been providing lottery games, hardware, and various related solutions across China for years now. Following the acquisition of a majority stake in AGTech, Alibaba and Ali Fortune with assist the lottery supplier with cloud computing, among other things.
As mentioned above, stringent regulations were introduced in Mainland China early in 2015, which resulted in the temporary suspension of online lottery sales in order for the government to be able to monitor and prevent fraud by unlicensed operators. The ban led to a 3.8% drop in the overall sale of official lottery products across the country. Yet, according to data released by China’s Ministry of Finance, the amount of RMB367.9 billion was generated by the sale of lottery offering last year.
What is more, it seems that lottery has a smaller market share in Mainland China than it does in regional jurisdictions like Hong Kong. According to data released by the China Sports Lottery Administration Center, in 2013, adult participation in Mainland China’s lottery system was estimated at an approximate of 7.5%. In comparison, adult participation of 56% was registered in the Hong Kong lottery system in 2012. Here it is important to note that casino gambling is forbidden in both China and Hong Kong.
