- Skillz and Flying Eagle Acquisition Corp. (NYSE: FEAC), a publicly-traded special purpose acquisition company (SPAC) announced to a business combination that will result in Skillz becoming a publicly-listed company.
Skillz — a leading mobile games platform connecting players in fair, fun, and meaningful competition — and Flying Eagle Acquisition Corp. (NYSE: FEAC), a publicly-traded special purpose acquisition company (SPAC) announced to a business combination that will result in Skillz becoming a publicly-listed company.
How does Skillz work? Skillz is pioneering the competitive mobile gaming experience and powers tournaments for thousands of game developers around the world, expanding, and leading growth in the mobile gaming market. And it is anticipated that in 2020, Skillz’s patented technology will power over 2 billion casual esports tournaments and facilitate $1.6 billion in paid entry fees for games hosted on its secure and proprietary platform.
The gaming industry is known for being larger than movies, music, and books with more than 2.7 billion gamers playing monthly and 10 million developers worldwide. And mobile is the fastest-growing segment of the gaming market as it expected to increase from $68 billion last year to $150 billion in 2025, according to Newzoo and GlobalData.
Flying Eagle Chairman and CEO Harry E. Sloan has been involved in the video game business since 1999 when he was a founding investor and board member of ZeniMax Media — which is the award-winning creator and publisher of interactive entertainment and its Bethesda Game Studio. And Sloan is partnered on Flying Eagle with Jeff Sagansky and Eli Baker, who together took DraftKings (Nasdaq: DKNG) public in April 2020.
The deal implies an equity valuation for Skillz of $3.5 billion or 6.3x projected 2022 revenue. And the estimated cash proceeds from the transaction are expected to consist of Flying Eagle’s $690 million of cash in trust.
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. And 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.
Post-transaction Skillz is estimated to have approximately $250 million of cash and cash equivalents on its consolidated balance sheet. And 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. And 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. And 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.
The Boards of Directors of each of Flying Eagle and Skillz have unanimously approved the transaction. The transaction will require the approval of the stockholders of both Flying Eagle and Skillz and is subject to other customary closing conditions, including the receipt of certain regulatory approvals. And the transaction is expected to close in the Fall of 2020.
LionTree Advisors and Jefferies LLC are acting as financial advisors to Skillz. And 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.
KEY QUOTES:
“Today we’re a leader in casual esports and are well-positioned to capture the global esports opportunity which will increasingly define the gaming market. Skillz fulfills the human desire for community and competition and is shaping the future of interactive entertainment.”
“Becoming a public company is an important milestone for Skillz. We look forward to accelerating growth as we work with our developer partners to bring Skillz-powered competitions to every kind of game for billions of gamers worldwide.”
— Skillz CEO and founder Andrew Paradise
“I’ve been active in the evolution of gaming for 20 years, from ZeniMax to DraftKings, and I believe Skillz has positioned itself as the platform for the future of gaming, where entertainment, gaming, and enablement converge.”
— Flying Eagle Chairman and CEO Harry E. Sloan
