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Diamond Eagle Acquisition Corporation

Diamond Eagle Acquisition Corporation

Oct 19, 2020 by Roman Developer

PROPOSED BUSINESS COMBINATION: DraftKings Inc.

ESTIMATED CURRENT FUNDS in TRUST: $405.0 million*
CURRENT PER SHARE REDEMPTION PRICE: $10.12*
EQUITY VALUE: $3.6 billion

*SPACInsider estimate a/o 4-23-20

Diamond Eagle Acquisition Corp. proposes to combine with DraftKings Inc., a digital sports entertainment and gaming company known for its industry-leading daily fantasy sports and mobile sports betting platforms, and SBTech, an international turnkey provider of cutting-edge sports betting and gaming technologies.

The combined company will become the only vertically-integrated pure-play sports betting and online gaming company based in the United States. The transaction is expected to close in the first half of 2020. In connection with the closing of the transaction, Diamond Eagle intends to change its name to DraftKings Inc., reincorporate in Nevada and remain Nasdaq-listed under a new ticker symbol.

It is anticipated that the combined company will have an equity market capitalization at closing of approximately $3.3 billion and have over $500 million of unrestricted cash on the balance sheet.

Completion of the proposed business combination is expected in the first half of 2020.

DraftKings Brand Highlights

  • First mobile operator to launch in New Jersey in August 2018
    • DraftKings has consistently maintained greater than 30% online market share, and for the nine months ended September 30, 2019, the company recorded 8.5x year-over-year revenue growth in the state.
  • Currently offers mobile and online sports betting in Indiana, New Jersey, Pennsylvania and West Virginia, and retail locations in Iowa, Mississippi, New Jersey and New York.
  • Daily fantasy sports product is available in 43 states and 8 international markets including Australia, Canada and the U.K., has approximately 60% market share.
  • DraftKings established a “one-platform” model by launching features like single sign-on, an integrated wallet and universal user profile, that allows a user to move seamlessly between a DFS contest, a sports wager and a hand of blackjack, enabling the company to quickly bring to market new offerings without reinventing the wheel of an entirely new back-end infrastructure.

SBTech Highlights

  • SBTech is a global full-service B2B turnkey technology provider with omni-channel sports betting solutions, trading services, and marketing and bonus tools powering some of the world’s most popular sports betting and online gaming brands.
  • 50+ partners in 20+ regulated markets and jurisdictions including Czech Republic, Denmark, Ireland, Italy, Mexico, Portugal, Spain, Sweden, and U.K. and Arkansas, Indiana, Mississippi, New Jersey, Oregon and Pennsylvania in United States.
  • Awarded exclusive contract offering mobile and retail sports betting for the Oregon state lottery with their Oregon Lottery Scoreboard brand.

TRANSACTION SUMMARY

The aggregate value of the consideration to be paid to DK and SBT shareholders is approximately $2.7 billion, of which:

DRAFT KINGS

  • (A) approximately $2.05 billion will be paid to:
    • (i) the current equityholders of DK in the form of shares of Class A common stock of New DraftKings, valued at the redemption price for the Company’s public shares in the Business Combination, and in the case of Jason Robins, such additional number of shares of Class B common stock of New DraftKings such that as of immediately following the completion of the Business Combination, Mr. Robins shall have ninety percent (90%) of the voting power of the capital stock of New DraftKings, and
    • (ii) holders of vested options and warrants exercisable for DK equity in the form of newly issued options and warrants of New DraftKings exercisable for New DraftKings Class A common stock, and

SBT

  • (B) approximately €590 million will be paid to the SBT Sellers and holders of vested options exercisable for equity of SBT, consisting of:
    • (i) €180 million in cash (the “Cash Consideration”) and
    • (ii) approximately €410 million in shares of New DraftKings Class A common stock, valued at the redemption price for the Company’s public shares in the Business Combination, and in the form of newly issued options of New DraftKings exercisable for New DraftKings Class A common stock.
      • Outstanding unvested options exercisable for DK or SBT equity will be converted into unvested options exercisable for shares of New DraftKings Class A common stock.
      • The Cash Consideration will come from the following sources: (1) proceeds available from the Company’s trust account, after giving effect to any and all redemptions; and (2) proceeds from private placements of shares of the Company’s Class A common stock to occur immediately prior to the closing of the Business Combination, of which the Company currently has commitments for $304.7 million of proceeds.

PIPE

$380 million total [updated: now $414 million]

  • $304 million in Class A common stock of the combined company that will close concurrently with the business combination
    • Institutional investors (including funds managed by Capital Research and Management Company, Wellington Management Company and Franklin Templeton)
    • 30,471,352 shares of Class A common stock for $10.00 per share and an aggregate of 3,000,000 warrants to purchase shares of Class A common stock of the Company. The warrants to be received by the Investors have terms identical to the Company’s publicly traded warrants.
  • ~$76 million in DK convertible notes that convert to PIPE shares. [updated: now $109.2 million]

EARNOUT

6,000,000 former Founder Shares to be used as New Earnout shares

DK Earnout Shares” means 2,280,000 shares of New DK Class A Common Stock

SBT Earnout Shares” means 720,000 shares of New DK Class A Common Stock

DEAC Founder Group (the “DEAC Earnout Shares”) = 3,000,000 (of the 6,000,000 Founder Shares)

  • One-third if the VWAP equals or exceeds $12.50 per share for twenty (20) of any thirty (30) consecutive trading days
  • One-third if the VWAP equals or exceeds $14.00 per share for twenty (20) of any thirty (30) consecutive trading days
  • One-third if the VWAP equals or exceeds $16.00 per share for twenty (20) of any thirty (30) consecutive trading days

VOTING RIGHTS – CEO of DraftKings

Subject to approval by the Company’s stockholders of the Business Combination Agreement, the Business Combination and certain other actions related thereto, in connection with the closing of the Business Combination,

  • New DraftKings will adopt an amended and restated charter, filed as Exhibit 2.1, which will provide for a dual class stock structure, and Jason Robins will receive shares of New DraftKings Class B common stock which will have 10:1 voting rights as compared to the shares of New DraftKings Class A common stock.

FOUNDER SHARES AND PRIVATE PLACEMENT PURCHASE

  • Founder Shares – 10,000,000 at IPO
    • 270,000 to be forfeited, with 120,000 of such Shares shall not be cancelled and shall be used in connection with the Equity Offering
    • 6,000,000 to be used for earnout shares (see above)
  • Private Placement Warrants at $1.50 – 6,333,333 at IPO (transferring 1,141,801 to the DK Stockholders)

NOTABLE CONDITIONS TO CLOSING

  • At least $400 million of cash at the closing (the “Minimum Proceeds Condition”), consisting of cash held in the Trust Account after giving effect to redemptions of public shares, if any, and proceeds from the Private Placement

NOTABLE CONDITIONS TO TERMINATION

  • by either the Company, the SBT Sellers’ Representative or DK if the closing of the Business Combination has not occurred on or before June 30, 2020
  • Termination fee: $3,000,000

SUBSEQUENT EVENTS

An 8-K was filed on 4/8/20 announcing an amended Business Combination Agreement.  The changes are a result of a cybersecurity attack on SBTech at the end of March 2020 that resulted in the SBTech platform being down for more that 72 hours.

  • $10,000,000 of the cash consideration to be received by the SBT Sellers and the holders of Cashed-Out SBT Options will be placed into escrow at the closing of the Business Combination for a period of two years.
  • Additional shares of Class A common stock of the post-business combination company to be received by the SBT Sellers and underlying the Exchanged SBT Options totaling $20,000,000 in value as of the Closing will be subject to a lock-up for a period of two years from Closing to cover certain indemnification obligations of the SBT Sellers and holders of Cashed-Out SBT Option relating to a recent cybersecurity incident.

Any remaining cash and shares will be released from escrow and such lock-up provisions, respectively, on the second anniversary of the closing date, subject to any outstanding unresolved claims.

Furthermore, if that amount of cash and shares isn’t enough to satisfy claims, the post-business combination company can seek recourse against the $25,000,000 cash escrow and $45,000,000 of locked-up shares as may be available in respect of SBT’s other indemnification obligations.

And if that amount still isn’t enough to satisfy claims, the post-business combination company will have recourse to indemnification directly from the SBT Sellers and the applicable SBT option holders, which will be capped at the aggregate value at the Closing of the consideration received by the them in the Business Combination.

Diamond Eagle transaction summary 3-12-20

ADVISORS

  • Goldman Sachs is acting as exclusive financial advisor to Diamond Eagle.
  • Raine Group is acting as exclusive financial advisor to DraftKings.
  • Sullivan & Cromwell LLP is acting as legal advisor to DraftKings.
  • Winston & Strawn LLP is acting as legal advisor to Diamond Eagle.
  • Stifel is acting as financial advisor and Herzog, Fox & Neeman and Skadden, Arps, Slate, Meagher & Flom LLP are acting as legal advisors to SBTech.
  • Deutsche Bank Securities Inc. and Goldman Sachs & Co. LLC are acting as capital markets advisors.
  • Goldman Sachs and Credit Suisse are acting as private placement agents to Diamond Eagle.

DIAMOND EAGLE MANAGEMENT & BOARD

Executive Officers

Jeff Sagansky, 67
Chief Executive Officer & Chairman

Mr. Sagansky served as the Chief Executive Officer of Platinum Eagle from January 2018, and as its chairman from December 2018, until the consummation of its business combination with Target Hospitality in March 2019, and continues to serve as a member of Target Hospitality’s board of directors. Mr. Sagansky has been a director of WillScot Corporation since Double Eagle was formed in June 26, 2015 and served as Double Eagle’s President and Chief Executive Officer from August 6, 2015 until the consummation of its business combination in November 2017. Mr. Sagansky currently serves as co-founder and chairman of Hemisphere Capital Management LLC, a private motion picture and television finance company, deploying more than $400 million in debt and, equity across four investment funds. Mr. Sagansky co-founded, together with Harry E. Sloan, Global Eagle Acquisition, which completed its business combination with Row 44 and AIA in January 2013. GEE currently is a Nasdaq-listed worldwide provider of media content, connectivity systems and operational data solutions to the travel industry. Mr. Sagansky served as Global Eagle Acquisition’s president from February 2011 through January 2013. He also co-founded, together with Mr. Sloan, Silver Eagle, which invested approximately $273.3 million in Videocon d2h in exchange for equity shares of Videocon d2h represented by ADSs in March 2015. In March 2018, Videocon d2h merged with and into Dish TV India Limited (NSE: DISHTV). Mr. Sagansky served as Silver Eagle’s president from April 2013 through March 2015.

Mr. Sagansky was formerly chief executive officer and then vice chairman of Paxson Communications Corporation from 1998 to 2003, where he launched the PAX TV program network in 1998. Under his leadership, PAX TV became a highly rated family-friendly television network with distribution growing from 60% of U.S. television households to almost 90% in only four years. In addition, Mr. Sagansky drove substantial improvement in the network’s financial performance with compounded annual revenue growth of 24% and compounded annual gross income growth of 30% from 1998 to 2002. Prior to joining Pax, Mr. Sagansky was co-president of Sony Pictures Entertainment, or SPE, from 1996 to 1998 where he was responsible for SPE’s strategic planning and worldwide television operations. While at SPE, he spearheaded SPE’s acquisition, in partnership with Liberty Media Corporation and other investors, of Telemundo Network Group, LLC, or Telemundo. The transaction generated significant returns for SPE as Telemundo was sold to the National Broadcasting Company, Inc., for over six times its original investment less than three years later. Previously, as executive vice president of Sony Corporation of America, or SCA, Mr. Sagansky oversaw the 1997 merger of SCA’s Loews Theaters unit with the Cineplex Odeon Corporation to create one of the world’s largest movie theater companies, and the highly successful U.S. launch of the Sony Playstation video game console. Prior to joining SCA, Mr. Sagansky was president of CBS Entertainment from 1990 to 1994, where he engineered CBS’s ratings rise from third to first place in eighteen months. Mr. Sagansky previously served as president of production and then president of TriStar Pictures, where he developed and oversaw production of a wide variety of successful films. Mr. Sagansky graduated with a BA from Harvard College and an MBA from Harvard Business School. He serves on the boards of Scripps Networks Interactive, GEE and GoEuro.

 

Board of Directors

Eli Baker, 44
President, Chief Financial Officer and Secretary

Mr. Baker served as the president, chief financial officer and secretary of Platinum Eagle from July 2017 until the consummation of its business combination with Target Hospitality in March 2019, and has served as a member of Target Hospitality’s board of directors since March 2019. Mr. Baker served as Double Eagle’s vice president, general counsel and secretary from June 2015 through its business combination in November 2017. Mr. Baker was also a director of Silver Eagle from July 2014 through Silver’ Eagle’s business combination in March 2015. Mr. Baker is a co-founder and partner of Manifest Investment Partners, LLC, a growth equity/venture fund that focuses in early stage technology-enabled business where he has served since June 2016. Mr. Baker continues to be co-managing director and a partner in Hemisphere Capital Management LLC, a private motion picture and television finance company where he has been since May 2009. Previously, Mr. Baker served as a principal at Grosvenor Park Investors from 2007 to 2009, a joint venture with Fortress Investment Group where he shared oversight over the special opportunity credit/debt funds in the media space. Mr. Baker is a former lawyer, and has served in a legal affairs capacity at various companies in and out of the media business. Mr. Baker earned a Bachelor of Arts degree from the University of California, Berkeley and a Juris Doctor from the University of California at Hastings Law School and is a member of the California State Bar.

Fredric Rosen, 75
Director

Mr. Rosen served as a director of Platinum Eagle from its initial public offering through the completion of its initial business combination in March 2019. Mr. Rosen has been a director of WillScot Corporation since the closing of Double Eagle’s initial business combination in September 2015. Mr. Rosen was the Co-CEO of Outbox Enterprises, LLC, an entity comprised of Outbox Technology, Cirque du Soleil and Anschutz Entertainment Group from September 2010 until February 2012. Mr. Rosen remained a principal in the enterprise until he sold his interests in October 2014. Since February 2012, Mr. Rosen has been a self-employed consultant. Mr. Rosen was the President and CEO of Ticketmaster Group, Inc. from 1982 to 1998. Mr. Rosen served as Chairman and CEO of Stone Canyon Entertainment, an operator of traveling amusement parks, from 2005 to 2008. Mr. Rosen has served as a director of Exari Group, Inc., a provider of cloud-based software for contract management, since May 2011. He served as a director of Prime Focus World, NV, a filmmaking partner to studios and film production companies, from August 2012 to June 2015. Mr. Rosen served as a trustee of Crossroads School for 16 years and was a board member of the Los Angeles Sports and Entertainment Commission for 15 years and now serves on their advisory board. He was a founding board member of the Wallis Annenberg Cultural Center in Beverly Hills and is currently a member of the Board of Governors of Cedars-Sinai Medical Center. Mr. Rosen is also currently a board member of the Pacific Council and The American Academy of Dramatic Arts. Mr. Rosen received his Bachelor of Arts degree from Clark University in June 1965 and his Juris Doctor from Brooklyn Law School in June 1969. He was admitted and became a member of the New York State Bar in November 1969 and practiced law in New York City from 1972 to 1982.

Joshua Kazam, 41
Director

Mr. Kazam served as a director of Platinum Eagle from its initial public offering through the completion of its initial business combination in March 2019. Mr. Kazam is a co-founder and has been a Partner of Two River Consulting, LLC (“Two River”) since June 2009. Prior to founding Two River, he served as Managing Director of a life science focused venture capital firm from 1999 to 2004, where he was responsible for ongoing operations of venture investments. Mr. Kazam co-founded and served on the Board of Directors of Kite Pharma, Inc. from its inception in 2009 until it was acquired by Gilead Sciences Inc. (GILD) in October 2017. He has also served on the Board of Directors of Capricor Therapeutics Inc. (CAPR) since its inception in 2007. Mr. Kazam also serves as a director of several privately held companies, including Hubble Contacts. Mr. Kazam is a Member of the Wharton School’s Undergraduate Executive Board and serves on the Board of Directors of the Desert Flower Foundation. Mr. Kazam received his B.S. in Economics from the Wharton School of the University of Pennsylvania.

ByRoman Developer