Ali Fortune takes 60% stake, as online sales ban poised to be lifted
Alibaba Group Holding Ltd and its financial affiliate are buying a controlling stake in Hong Kong-listed lottery operator AGTech Holdings Ltd, for HK$2.39 billion ($308 million).
Ali Fortune Investment Holding Ltd, which is 60 percent owned by Alibaba and 40 percent owned by its financial services arm Zhejiang Ant Small & Micro Financial Services Group Co, has agreed to buy HK$1.68 billion in shares and HK$712.6 million of convertible bonds in AGTech.
The deal will give the Alibaba unit 59.45 percent of AGTech, according to the lottery operator's filing to the Hong Kong stock exchange on Sunday－a timely purchase as the suspension of online lottery sales looks likely to be lifted sometime this year.
The government banned unauthorized online lottery sales in April 2015.
AGTech is engaged in gaming technologies including game software and hardware, and lottery distribution.
Its filing said it will be the exclusive business platform of Alibaba and Ant Financial to apply for, and hold business qualifications and licenses for, the operations of lottery businesses.
Alibaba and its affiliate will also provide technical services and resources such as cloud computing services and e-commerce, said AGTech.
The company, which has 200 employees, said it will benefit significantly from the investor, should Internet channels for lottery sales re-open.
China has two State-run lotteries: the China Sports Lottery and China Welfare Lottery.
The Ministry of Finance approved two companies－500.com Ltd and China Sports Lottery Operation Co Ltd－to sell online lottery tickets, under a pilot program before the suspension.
Li Kai, an analyst with the Beijing-based Internet consultancy Analysys International, said that the suspension of online lottery sales is likely to be lifted within the year as officials at the annual lottery strategy meeting in January said they will actively push the preparatory work for a pilot online lottery sales program forward.
China's lottery market is too big for two online lottery-selling companies to fill. More licenses are expected to be offered to more players, Li said.
Alibaba's advantage in e-commerce, big data, online payment can certainly give the online sales of lottery a strong boost.
Annual lottery sales in China dropped 3.8 percent to 367.9 billion yuan ($56.47 billion) in 2015, in the wake of online lottery sales being banned, after 11 consecutive years of growth, according to statistics from the Ministry of Finance.
About 400 Internet companies were involved in online lottery sales in 2014, generating revenue of more than 85 billion yuan, accounting for 22 percent of total lottery income.
Min Jie, a Beijing resident, said he used to buy occasionally lottery tickets when shopping online on Alibaba's Taobao platform.
I found it very convenient as I could automatically buy the same combination of numbers, said the 30-year-old, who spent at average 10 yuan a week.
But when the service got suspended, I never bothered to buy lotteries at bricks-and-mortar stores, he said.
The chances of hitting the jackpot is next to zero and it just didn't make sense to visit shops to wish for something that is almost impossible to win.