National Lottery operator put up for sale

The Ontario Teachers’ Pension Plan (OTPP) is understood to be selling its majority stake in Premier Lotteries Ireland with more than a decade left to run on its licence.

OTPP acquired the operator in 2014 for €405m in a deal that granted a 20-year licensing period and included keeping long-time lottery operator An Post and An Post Pension Funds as junior partners

It is understood that An Post has no plans to dispose of its own minority stake in the event of a sale by OTPP.

OTPP declined to comment.

The National Lottery made sales of €1.05bn in 2021, its most successful year to date, according to the most recent annual report published last summer.

Of that, €304m was distributed to what it calls “good causes”, while €586m was paid out in prizes for Lotto and other games, including scratch cards.

The move follows OTPP’s decision to sell both its UK and Illinois lottery businesses, which were operated by Camelot, suggesting the fund is exiting the gambling business.

Czech operator Allwyn was the buyer for both Camelot UK and Camelot Lottery Services in separate transactions in November and December.

The Government put the National Lottery up for sale in 2012, when the State was just a year into its bailout programme, with a pledge to spend the proceeds on the National Children’s Hospital.

While it wasn’t exactly a crown jewel, An Bord Snip Nua was looking to cash in on any available State assets.

However, OTPP might have overpaid. Market analysts at the time forecast a deal price of €250m to €350m, so the eventual €405m price tag came in a bit richer than expected, initially benefitting stockbroker Davy, which scooped up a €1.4m advisory fee.

An Post was collecting a tiny payment of just €3m on €772m in turnover to operate the licence when it was put on the block. But there was more earning potential than that over a 20-year time horizon.

Commercial operators typically take fees up to 6pc of turnover, meaning OTPP should have broken even or made a slightly positive return over its nine year holding period. Yet the next decade would have been when the real money was to be made, as turnover is now far higher and the acquisition costs should have been covered by now.

OTPP made a modest 4pc return for its members in 2022 on nearly the nearly C$250bn in assets it manages on behalf of teachers in Ontario, Canada’s most populous province.

The National Lottery was the subject of controversy in 2021 when the main Lotto draw rolled over for four months, reaching the prize limit of €19m.

The record-breaking jackpot of more than €19m created a surge in sales from September to December as week after week the top prize went unclaimed.

The big prize was finally won in January 2022 after Premier Lotteries Ireland got regulatory permission to hold a must-win draw after no top prize had been awarded since June.

The highly unusual circumstances prompted much media commentary and statements in the Dail.

Subsequently, the National Lottery was the target of an unusually high number of complaints to the Advertising Standards Authority of Ireland (ASAI) after it launched a campaign to show where its revenue goes.

Last year the ASAI fielded 31 submissions up to October – 3pc of all complaints – objecting to the campaign’s claim that 90pc of the money spent on lotto tickets and scratch cards went back into “the community”.

The complainants said there was a "lack of substantiation and transparency surrounding the statement" and that retailers, who receive 5pc of lottery money in the form of commissions, do not constitute part of “the community”.

Some also contended that money on lottery games did not come back to the community at all but instead went to OTPP.

The ASAI failed to uphold the complaints, however, based on figures in the National Lottery's audited accounts showing that just 10pc of revenues went to running costs and profit.