London-listed DJI Holdings Plc, a supplier to mainland China’s lottery market, said in a filing on last Friday it intends to seek a listing on the New York Stock Exchange “in the foreseeable future” for a new joint venture in northeast China.
The joint venture – also announced on Friday – is with Heilongjiang Sports Bureau (HSB), which DJI says either operates, or is responsible for, all sports lottery activities in that Chinese province.
The HSB joint venture will include – for what DJI says is the first time in a Chinese province – a business-to-business (B2B) online booking system for sports lottery sales.
Online sales of mainland China lottery products are currently under a temporary suspension, a move that has hit several companies. In early April, eight Chinese government agencies confirmed a suspension of what they described as “unauthorised online lottery sales services”.
DJI said in its Friday filing: “The joint venture has agreed terms with three of China’s largest online portals to sell and promote its B2B system from November 1, 2015, giving it direct access to their significant customer bases. A full e-commerce platform for the HSB is expected to follow in 2016.
“This opportunity is the primary focus of the HSB joint venture as it seeks to comply with China’s Internet Plus action plan, announced by Premier Li Keqiang earlier this year, to create a new engine for economic growth by integrating the Internet with traditional industries and developing e-commerce,” added DJI.
DJI will have 40 percent and HSB 60 percent of the new venture, with DJI providing RMB20 million (US$3.1 million) in cash and HSB a consideration of RMB30 million – RMB5 million in cash and RMB25 million via “certain key contracts”.
In its Friday announcement, DJI said Heilongjiang’s sports lottery sales in 2014 were RMB7.03 billion, an increase of more than 60 percent compared to the previous year. China’s Ministry of Finance reported that nationwide in July 2014, sports lottery sales had been hugely boosted by the FIFA World Cup soccer tournament held in Brazil that June and July.
Commenting on the joint venture agreement, Darren Mercer, chief executive of DJI, said: “This exciting and important joint venture is further evidence of DJI executing the strategy outlined at the time of our IPO [initial public offering]. We are partnering with key provinces in China, increasing our channels to market and developing complementary revenue streams beyond lottery sales.”
One feature of the joint venture announced on Friday is that HSB and DJI have agreed in principle that up to 20 percent of post tax earnings from the partnership will be retained and invested in the development and promotion of football in Heilongjiang, including in football academies, new facilities and coaching.
On Wednesday DJI announced a promotional partnership with English soccer giants Arsenal Football Club.
Under DJI’s agreement with Arsenal, the firm will be authorised to offer sports lottery players in China weekly prizes, including Arsenal team merchandise and tickets to attend matches at the club’s home stadium in London.