Alibaba Group Holding Ltd. and its financial affiliate are buying a major stake in Hong Kong-listed lottery operator AGTech Holdings Ltd. for HK$2.39 billion ($308 million), China Daily reported.
According to the report, 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.
According to the lottery operator's filing to the Hong Kong stock exchange on Sunday, March 6, the deal will give the Alibaba unit 59.45 percent of AGTech, which is seen as a timely purchase since the suspension of online lottery sales is likely to be lifted sometime this year.
Selling of unauthorized online lottery was banned by the government in April 2015.
AGTech, which is engaged in gaming technologies including game software and hardware and lottery distribution, said in its filing that the company will be the exclusive business platform of Alibaba and Ant Financial for the operations of lottery businesses.
AGTech said that Alibaba and its affiliate will also provide technical services and resources such as cloud computing and e-commerce. The company expects to benefit significantly from Alibaba once Internet channels for lottery sales re-open.
Aside from the two state-run lotteries (the China Sports Lottery and China Welfare Lottery), the Ministry of Finance approved two other companies--500.com Ltd. and China Sports Lottery Operation Co. Ltd.--to sell online lottery tickets under a pilot program before the suspension.
According to Li Kai, an analyst with the Beijing-based Internet consultancy Analysys International, the suspension of online lottery sales is likely to be lifted within the year as officials said at the annual meeting in January that they will work to have a pilot online lottery sales program to push through.
"China's lottery market is too big for two online lottery-selling companies to fill," Li said. "More licenses are expected to be offered to more players. Alibaba's advantage in e-commerce, big data, online payment can certainly give the online sales of lottery a strong boost."
Statistics from the Ministry of Finance showed that annual lottery sales in China dropped 3.8 percent to 367.9 billion yuan ($56.47 billion) in 2015, after the online lottery sales were banned, following 11 consecutive years of growth.
In 2014, about 400 Internet companies were involved in online lottery sales which generated revenue of more than 85 billion yuan, accounting for 22 percent of total lottery income.