Flying Eagle Acquisition Corporation
PROPOSED BUSINESS COMBINATION: Skillz, Inc.
ESTIMATED CURRENT FUNDS in TRUST: $690.2 million*
CURRENT PER SHARE REDEMPTION PRICE: $10.00*
ENTERPRISE VALUE: $3.25 billion
*SPACInsider estimate
Flying Eagle Acquisition Corp. proposes to combine with Skillz Inc., a mobile games platform that connects players in fair, fun, and meaningful competition. The Skillz platform helps developers build multi-million dollar franchises by enabling social competition in their games. Leveraging its patented technology, Skillz hosts billions of casual esports tournaments for millions of mobile players worldwide, and distributes millions in prizes each month. The company is headquartered in San Francisco and backed by leading venture capitalists, media companies, and professional sports leagues and franchises.
TRANSACTION
The transaction implies an equity valuation for Skillz of $3.5 billion, or 6.3x projected 2022 revenue. Estimated cash proceeds from the transaction are expected to consist of Flying Eagle’s $690 million of cash in trust. In addition, investors led by Wellington Management Company, Fidelity Management & Research Company, LLC, Franklin Templeton, and Neuberger Berman funds have committed to invest $159 million in the form of a PIPE at a price of $10.00 per share of Class A common stock of Flying Eagle immediately prior to the closing of the transaction.
Flying Eagle’s stockholders with the right to redeem shares representing in excess of $95 million of cash in trust have agreed not to exercise such rights in connection with the transaction.
It is anticipated that post-transaction Skillz will have approximately $250 million of cash and cash equivalents on its consolidated balance sheet. The company expects to use the proceeds to accelerate Skillz’s growth in both domestic and international markets, support marketing efforts, and provide additional working capital.
Skillz stockholders may elect to receive their consideration in either cash or stock of the combined company (or a combination of both), subject to a maximum cash amount.
- The maximum cash amount will be an amount equal to the cash remaining in Flying Eagle’s trust account (after taking into account any redemptions by its public stockholders and payment of Skillz’s and Flying Eagle’s outstanding transaction expenses), plus the amount to be received from the PIPE investment, plus the closing cash of Skillz less $250 million (which will remain on the consolidated balance sheet of the combined company).
- If the aggregate amount of cash elected to be received by the Skillz stockholders exceeds the maximum cash amount, the cash to be received by each Skillz stockholder electing to receive cash will be reduced on a pro rata basis and the Skillz stockholders will receive additional stock of the combined company.
- If the aggregate amount of cash elected to be received by the Skillz stockholders is less than the maximum cash amount, the excess cash will be allocated pro rata among the Skillz stockholders and the number of shares of the combined company to be received by each Skillz stockholder electing to receive stock consideration will be adjusted downwards.
PIPE
- An aggregate of 15,853,052 shares of Class A common stock for $10 per share
- Investors including Wellington, Fidelity, Franklin Templeton, and Neuberger Berman funds have committed to a $159 million PIPE with total commitments exceeding $250 million
INVESTOR RIGHTS AGREEMENT
- The Investors’ Rights Agreement also restricts the ability of each stockholder who is a party thereto to transfer its shares of New Skillz common stock for a period of 2 years following the closing of the Business Combination
- In general, 1,500,000 shares of New Skillz common stock held by each stockholder who is a party to the Investors’ Rights Agreement and its affiliates will be released from the transfer restrictions each quarter beginning on the date that is six months following the Closing.
NON-REDEMPTION & VOTING AGREEMENTS
- FEAC entered into non-redemption agreements with certain holders of shares of FEAC Class A common stock
- Such holders agreed not to exercise their redemption rights in connection with the Business Combination.
- The aggregate number of shares of FEAC Class A common stock subject to the Non-Redemption Agreements is 9,577,500, which represents $95.84 million of otherwise exercisable redemption rights.
- Holders of 6,972,518 shares of FEAC’s common stock have agreed to vote in favor of the Business Combination.
- When such Voting Agreements are taken together with the Sponsor’s agreement to vote in favor of the Business Combination, holders of approximately 28% of the issued and outstanding common stock of FEAC have agreed to vote in favor of the Business Combination.
CANCELLATION OF SPONSOR SHARES AND WARRANTS
- The Sponsor agreed to cancel 899,797 shares of FEAC common stock and 5,016,667 private placement warrants held by the Sponsor.
LOCK-UP
- Paradise, Chafkin, substantially all of the existing Skillz stockholders as well as Flying Eagle’s sponsor have agreed to a 24-month lock-up, subject to quarterly releases of 1.5 million shares per holder commencing 180 days following the closing (SEE INVESTOR RIGHTS AGREEMENT ABOVE)
NOTABLE CONDITIONS TO CLOSING
- FEAC having at least $550 million of cash at the closing of the Business Combination, consisting of:
- cash held in its trust account and
- the aggregate amount of cash actually invested in (or contributed to) the Company pursuant to the Subscription Agreements,
- after giving effect to redemptions of public shares, if any, but
- before giving effect to the consummation of the closing of the Business Combination and the payment of Skillz’s and FEAC’s outstanding transaction expenses as contemplated by the Merger Agreement
NOTABLE CONDITIONS TO TERMINATION
- By either FEAC or Skillz if the closing of the Business Combination has not occurred on or before December 31, 2020
ADVISORS
- LionTree Advisors and Jefferies LLC are acting as financial advisors to Skillz.
- Winston & Strawn LLP is acting as legal advisor to Skillz.
- Goldman Sachs & Co. LLC is acting as financial advisor to Flying Eagle as well as the exclusive placement agent for the PIPE.
- White & Case LLP is acting as legal advisor to Flying Eagle.
FLYING EAGLE MANAGEMENT & BOARD
Executive Officers
Harry E. Sloan, 69
Chief Executive Officer & Chairman
Most recently Mr. Sloan was a founding investor of Diamond Eagle Acquisition Corp. (Nasdaq: DEAC), which raised $400 million in its initial public offering in May 2019. Mr. Sloan previously served as chairman and chief executive officer of Silver Eagle Acquisition Corp. from April 2013 until the consummation of its initial business combination in March 2015 with Videocon d2h Limited (“Videocon”) (Nasdaq: VDTH). From May 2016 to April 2018 Mr. Sloan served on the board of directors of Videocon, where he was a member of its Nomination, Remuneration and Compensation Committee. Mr. Sloan also served as chairman and chief executive officer of Global Eagle Acquisition Corp. from February 2011 until the consummation of its business combination in January 2013, and he remains a director of the combined company, Global Eagle Entertainment Inc. From October 2005 to August 2009, Mr. Sloan served as chairman and chief executive officer of Metro-Goldwyn-Mayer, Inc., or MGM, a motion picture, television, home entertainment, and theatrical production and distribution company, and thereafter continued as non-executive chairman until December 2010. MGM filed for bankruptcy protection in 2010. From 1990 to 2002, Mr. Sloan was chairman and chief executive officer of SBS Broadcasting, S.A. (“SBS”) (Nasdaq: SBTV), a European broadcasting group, operating commercial television, premium pay channels, radio stations and related print businesses in Western and Central and Eastern Europe, which he founded in 1990 and continued as executive chairman until 2005. In 1999, SBS became the largest shareholder of Lions Gate Entertainment Corp., or Lions Gate, an independent motion picture and television production company. Mr. Sloan served as chairman of the board of Lions Gate from April 2004 to March 2005. From 1983 to 1989, Mr. Sloan was co-chairman of New World Entertainment Ltd., an independent motion picture and television production company. In January 2011, Mr. Sloan joined the board of Promotora de Informaciones, S.A. (“PRISA”) (NYSE: PRIS), Spain’s largest media conglomerate which owns El Pais, the leading newspaper in the Spanish-speaking world, as well as pay television, radio and digital properties. He has served on the board of ZeniMax Media Inc., an independent producer of interactive gaming and web content, since 1999. He currently serves on the UCLA Anderson School of Management Board of Visitors and the Executive Board of UCLA Theatre, Film and Television. Mr. Sloan received his B.A. degree from UCLA and J.D. Degree from Loyola Law School.
Eli Baker, 45
President, Chief Financial Officer & Secretary
Mr. Baker has served as president, chief financial officer and secretary of Diamond Eagle since March 2019. 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 finance company that specializes in special opportunity equity and credit investments in the media and entertainment industry. Mr. Baker is a former lawyer and 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.
Board of Directors
Scott M. Delman, 60
Director
Mr . Delman has served on Diamond Eagle’s board of directors since December 2019. Mr. Delman is the founder of Blue Spruce Productions, a producer of top Broadway and West End theatrical events, and is also the Managing Partner of DGZ Capital, a private equity firm that acquires ownership stakes in alternative investment firms (“DGZ”). Prior to forming DGZ, Mr. Delman was co-founder and President of Capital Z Investments, where he initiated and managed a multi-billion-dollar investment program to sponsor the creation of new alternative asset management companies. Capital Z Investments has invested over $2.0 billion in more than 25 investment firms throughout North America, Europe and Asia. Mr. Delman has served on the boards and advisory councils of various academic, corporate, cultural and public policy organizations such as Third Way, the New America Foundation, The Truman Project, Manhattan Theatre Club, Yale Drama School and the Williamstown Theatre Festival. Mr. Delman graduated with honors from Yale College in 1982 and received an MBA from Harvard Business School in 1986. Mr. Delman also served as a Visiting Senior Fellow at Harvard University’s JFK School for Government in 2006 and 2007, where he focused on the intersection between international capital markets and national security.
Joshua Kazam, 42
Director
Mr. Kazam has served on Diamond Eagle’s board of directors since the completion of its initial public offering. 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 fall of 2004. Mr. Kazam is a co-founder, officer and director of Allogene Therapeutics, Inc. (Nasdaq: ALLO) and a co-founder of Vida Ventures. 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. (Nasdaq: GILD) in October 2017. Mr. Kazam also serves as a director of several privately held companies, including Kronos Bio, Hubble Contacts, Byheart, Inc. and Breakthrough Properties, LLC. 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.
Alan Mnuchin, 59 [Added 5/8/20]
Class II Director
Mr. Mnuchin, 59, has been chief executive officer of Ariliam Group since January 2019. Mr. Mnuchin founded AGM Partners LLC, a merchant banking boutique firm focusing on companies in the media and entertainment and related industries, and was the managing principal there from May 2003 to December 2018. Prior to founding AGM Partners LLC, Mr. Mnuchin was the global head of the Media Group in the Investment Banking Division of Lehman Brothers Holdings Inc. from February 2000 to May 2003. Mr. Mnuchin was also the head of the Media & Entertainment Group in the Investment Banking Department at The Bear Stearns Companies, Inc. from 1996 to 2000 and a vice president in the CME Group at Goldman Sachs & Co. from 1984 to 1996. From January 2019 to March 2019, Mr. Mnuchin served as a director of Target Hospitality Corp. (Nasdaq: TH). Mr. Mnuchin received an M.B.A. from the University of Chicago in 1984 and a B.S. from the Wharton School at the University of Pennsylvania in 1982.
Laurence E. Paul, 55 [Added 5/8/20]
Class III Director
Mr. Paul, 55, has been the co-founder and managing principal of Laurel Crown Partners since 2001. Mr. Paul has extensive experience in private equity investing, the identification, negotiation and purchase of new portfolio companies, sale of existing entities and general strategic and financial involvement and oversight of portfolio companies. From 1994 to 2001, Mr. Paul worked at Credit Suisse (NYSE: CS) in various investment banking roles such as senior vice president and managing director of the Investment Banking Division. Mr. Paul is currently a member of the board of directors for several organizations, including: Harvard Medical School’s Board of Fellows, Harvard Alumni Association, Children’s Hospital of Los Angeles, Pittsburgh Steelers Football Club, Chuck Noll Foundation for Brain Injury Research, Five Four Clothing, Crew Knitwear, Kova International, Nano Global, Vereco and P&P Real Estate LLC. From 2013 to 2017, Mr. Paul was a member and later chairman of the American Red Cross’ audit committee. Mr. Paul holds a B.A. from Harvard College, a M.D. from Harvard Medical School and an M.B.A. from Stanford University.