AGTech places bet of HK$777.7m on lottery
AGTech Holdings, an information technology firm listed in Hong Kong's second board, will pay HK$777.7 million to buy Shining China, a private firm that has consulting contracts with local branches of the state-run China Sports Lottery in Chongqing, Hunan and Jiangxi.
Although the price represents more than 8,000 times the net asset value of Shining China, AGTech said the acquisition 'will allow the group to accelerate its penetration into the sports lottery sector'.
Two state-run lotteries are the only legal form of gambling on the mainland. Nationwide sales of the Sports Lottery rose 7 per cent last year to HK$32.3 billion.
Since November last year, Shining China has been advising provincial and municipal branches of the Sports Lottery on setting up retail betting outlets and providing training, marketing, and management of operations and sales.
AGTech hopes to expand Shining China's operations beyond the three current regions and may attempt to cross-sell sports-betting products it plans to develop with its mainland joint venture partner Ladbrokes.
The partnership with the British firm is awaiting approval for the sale of video betting terminals, which allow fixed-odds wagers on sports matches or other games, to licensed lottery distribution agents.
Ladbrokes in January took a 49 per cent stake in the newly formed HK$10 million venture, with a one-year option to acquire 158 million shares in AGTech for up to HK$316.5 million.
AGTech said it might place new shares to investors to raise the HK$311 million, and would settle the balance by issuing HK$466.6 million worth of new shares, or 7.33 per cent of its enlarged capital, to Shining China's owners.
Shining China reported an unaudited loss of HK$400,000 on turnover of HK$1.2 million in the first three months of the year with a net asset value of HK$93,000 at the end of March.
AGTech said Shining China's revenue model would be disclosed in a shareholders' circular. Most lottery consultants receive a percentage of gaming revenues from lottery sales.
AGTech, previously known as MegaInfo Holdings, was the subject of a management takeover in July last year. New controlling shareholder and chairman John Sun Ho is also deputy chairman of China LotSynergy Holdings, which sells video betting terminals to the other half of the mainland lottery industry's state duopoly, the China Welfare Lottery Issuance Centre.
This month LotSynergy sold shares and convertible notes representing up to 12.2 per cent of the company to New York-listed International Game Technology, the world's largest maker of slot machines, for HK$802.2 million.
AGTech shares fell 5.45 per cent to close at HK$1.91 after yesterday's announcement.
Odds on
Shining China has consulting contracts with Sports Lottery
Nationwide sales of the Sports Lottery last year, in HK$b: 32.3
