MGT Capital To Sell Daily Fantasy Sports Business To Sportech Subsidiary
A news release in the past few hours could have some far reaching consequences for the daily fantasy sports market which is still dominated by the main two players DraftKings and FanDuel. MGT Capital investments who own the third largest player in this sector DraftDay announced they will be selling their daily fantasy sports assets including DraftDay along with the MGT Sports business-to-business network. In terms of cash the transaction is set to provide MGT with about $7m in total consideration which includes $4 million in cash with MGT retaining an equity interests in the new venture which has an initial valuation of $3 million.
The deal is expected to be finalized by the current end of this quarter. The interesting part of the deal is the new entity formed to acquire DraftDay, Random Outcome USA Inc. who is set to seek global funding from investors in North America. On management side the newly formed business is set to be managed by Sportech Digital who are a subsidiary of one of the largest B2B organizations in sport, Sportech LLC.
This merging of a daily fantasy sports betting company with the resources of Sportech could according to experts make it the leading business-to-business player in the DFS space.
President of Sportech Digital, Rich Roberts already sent out a warning to the major players in this sector and said,” A focused daily fantasy sports business to be delivered on a B2B partnership basis to the regulated gaming industry has the potential to quickly disrupt the rapidly growing market.”
CEO of MGT, Robert Ladd was delighted at the sale as he believes it will add to their stockholder value. The equity they still enjoy should also rise enormously. He said,” Today’s announcement reinforces our mandate to grow stockholder value. DraftDay could not be going into better hands, and we firmly believe our residual interest will undergo enormous appreciation under Sportech’s leadership, relationships and access to capital.”