Spain's government on Friday gave approval for a 30 percent stake in the state-owned lottery operator to be listed on the Madrid Stock Exchange, a share sale that would be Spain's biggest-ever initial public offering.

Spain's development minister and government spokesman, Jose Blanco, made the announcement in a press conference following the weekly Cabinet meeting, saying the offering was aimed at both institutional and retail investors.

Depending on its market valuation, Loterias y Apuestas del Estado will become the seventh- or eight-largest company on the Spanish stock market's benchmark IBEX-35 index by market capitalization, which company chairman Aurelio Martinez estimated in June at around 21 billion euros ($28.37 billion).

Market sources said the Spanish government hopes to raise around 7 billion euros ($9.45 billion) from the share sale.

Spain has been grappling with high budget deficits in recent years and has set a target of reducing the annual budget deficit to 3 percent of gross domestic product by 2013, in line with European Union mandates, down from more than 11 percent of GDP in 2009.

While proceeds from the privatization would not be considered current income and therefore could not be used to reduce the budget deficit, it could allow the government to reduce its dependence on bond issues - at high yields - to raise funds.

Of the 30 percent stake in Loterias to be listed, 40 percent will be offered to institutional investors - including outside Spain - and the rest to retail investors.

Spain's stock market regulator is expected to approve the offering next week, which would allow Loterias to open its books and begin a management roadshow on Oct. 3.

The company's stock-market debut could then take place on Oct. 20 or Oct. 21.

Goldman Sachs, JP Morgan, UBS, Credit Suisse, BBVA and Santander will underwrite the IPO.