Tencent’s latest gamble: a 7.5% stake in lottery tech company CLS

Chinese web giant Tencent (HKG:0700) has bought a 7.53 percent stake in lottery technology and equipment provider China LotSynergy Holdings (HKG:1371), according to Techweb.

Tencent conditionally agreed to buy nearly 600 million shares for an undisclosed amount. Based on CLS’s share price as of press time, that puts the figure somewhere north of US$65 million. Techweb reports the company could raise up to US$87 million.

CLS makes and sells lottery equipment and systems, games, and other solutions as well as technical operations to install and maintain these terminals. That includes, video, keno, and online lottery.

So why is Tencent, the maker of hit social apps like WeChat and QQ, interested in lottery tech? China places a nationwide ban on gambling with the exception of lotteries, so it’s become extremely popular among the country’s gamblers. Last year, China’s lotteries generated more than US$48 billion in sales, second only to the US.

In fact, WeChat already has a lottery feature built in to capitalize on the lucrative game. Users can use money in their WeChat payments accounts to play. This new stake in CLS could help boost those offerings.

WeChat’s in-app lottery

In January CLS cut a deal with the country’s biggest mobile carrier, China Mobile, that let its customers read lottery information and buy tickets via CLS’s mobile apps.

(Source: Techweb; top image via Flickr user Esben Theis Jensen)