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Money: Another DFS Buy-In! Viggle, Sportech Buy Into DraftDay

Entertainment consumer rewards platform Viggle Inc. and a unit of a U.K.-based betting company have become part owners of a holding company for daily fantasy sports business DraftDay, alongside DraftDay’s former sole owner MGT Capital Investments Inc., the companies said Wednesday.

MGT said it sold DraftDay for total consideration of about $5 million, including restricted Viggle stock, Viggle promissory notes and a continuing equity stake in the new holding entity DraftDay Gaming Group Inc. Viggle and Sportech Inc. jointly formed DraftDay Gaming Group as a vehicle for the deal, with Sportech paying nothing but agreeing to provide a management team and access to its customer network, according to a statement from Sportech.

The companies said the existing DraftDay platform for daily simulated sports drafts will be linked up with the Viggle app, allowing Viggle users to participate in fantasy sports while watching real games and collecting rewards. Viggle also said it plans to relaunch its own fantasy game MyGuy, which lets users play the role of a coach during game play.

Rich Roberts, the president of Sportech’s digital division and new CEO of DraftDay, said in a statement that he had high hopes for the new team.

“DraftDay holds the potential to quickly disrupt the daily fantasy sports business with B2B partnerships including new ventures with companies within the regulated gaming industry,” Roberts said. “Integrating DraftDay games within the Viggle app introduces significant potential to expand the user audience of U.S. sports fans while creating more visibility for DraftDay which we expect will continue to build in the months and years ahead.”

Viggle holds a 44 percent stake in the new DraftDay entity, while Sportech holds 35 percent, MGT holds 10 percent and other stakeholders own the rest, according to MGT. Sportech will handle DraftDay’s day-to-day management, while Viggle CEO and entertainment mogul Robert F.X. Sillerman will chair the board of the new entity.

DraftDay has already paid out more than $30 million in prizes and is “second-to-none in the fantasy sports industry” in terms of brand loyalty and user retention, the companies said. The new entity plans to add games to meet consumer demand for daily fantasy sports.

Viggle CFO John Small said in a statement that the deal makes good business sense for his company.

“The merged assets of DraftDay Gaming Group create a compelling win-win for both sports enthusiasts and the advertisers aiming to reach this demographic in a very targeted way designed to build brand loyalty,” Small said. “We expect our investment in DraftDay to provide a new revenue source, as Viggle users and advertisers now have even more reasons to continue enjoying what the Viggle app has to offer.”

MGT said in June that it had agreed to sell fantasy sports assets including DraftDay to a group of investors led by Sportech for total consideration of about $7 million, including $4 million in cash. A statement released by MGT at the time did not mention Viggle as a party to the transaction.

A representative of MGT could not immediately be reached for comment on why the structure of the deal changed after the June announcement.

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