Rockets agree to sell majority stake in Clutch Gaming to 76ers for $20 million
Harris Blitzer Sports & Entertainment, parent company of thePhiladelphia 76ers and Dignitas, has agreed in principle to acquire a majority stake in professional League of Legends team Clutch Gaming from their current owner, the Houston Rockets, for a total investment of $20 million, according to documents obtained by ESPN.
Per the deal, Clutch Gaming will be rebranded to Dignitas later in the year, probably after the 2019 League of Legends World Championship, sources said. It will mark the return of the 16-year-old esports team to League of Legends for the first time since it was not accepted as a franchise partner for the league in October 2017.
When the deal is completed, Clutch will become the first League of Legends Championship Series team that has sold a majority stake since the league franchised in October 2017. Two other teams, OpTic Gaming owner Infinite Esports & Entertainment and Echo Fox, are also in the process of raising significant capital in exchange for majority share, league sources told ESPN.
Of the $20 million, the Rockets will take $12.5 million in cash over multiple payments from Harris Blitzer Sports & Entertainment and retain a 31.8 percent equity share in a new entity that will own both Dignitas and the Clutch Gaming League of Legends slot, sources said. Harris Blitzer Sports & Entertainment will own 68.2 percent of that new entity. The company declined to comment through a spokesperson. The Houston Rockets did not respond to a request for comment.
The remaining $7.5 million will be used to fund the team's operations for the 2019, 2020 and 2021 calendar years, as well as pay $1.5 million this year toward the outstanding debt to Riot Games for the $13 million franchise tag. So far, the Rockets have paid $8 million of that debt and funded Clutch Gaming operations since October 2017, when their application was accepted into the League of Legends Championship Series.
Together, that new entity -- named Mal País -- is being valued at $47.5 million before the investment, with Clutch being valued at $30 million and Dignitas worth $17.5 million. Leading that new entity will be Dignitas CEO Michael Prindiville, whom Harris Blitzer Sports & Entertainment hired in May from NBC Sports.
The board of Mal País will be led by David Abrams, the head of investments and strategy for Harris Blitzer Sports & Entertainment, and will include HBSE CEO Scott O'Neil, HBSE Ventures partner Chip Austin and former Electronic Arts vice president Greg Richardson, who has worked with Dignitas since HBSE acquired the team in September 2016.
Prindiville told ESPN in March during the South by Southwest conference in Austin, Texas, that Dignitas desired to re-enter the League of Legends Championship Series. Dignitas was not accepted as a franchise member to that league in October 2017, something Prindiville said he wanted to change. The deal for Clutch would do just that.
"The history with League of Legends and Dignitas is definitely substantial, and for me, it's really connected to the North American League of Legends Championship Series first and foremost," Prindiville said. "That's going to be our focus, that's the story that's been written and the narrative we want to tell going forward of, how do we get back there? It's aspirational, but I think we can do it. ... We really have the capabilities of building something big throughout North America through HBSE and so my focus was what we could do to build something in North America, specifically with Riot and the League Championship Series."
In January, Infinite's majority shareholders, led by Texas Rangers owners Neil Leibman and Ray Davis, and Houston Astrosminority owner John Havens, listed the team for sale seeking around $150 million, as reported by ESPN. That sale is now being overseen by investment bank J.P. Morgan Chase.
Meanwhile, Echo Fox founder and three-time NBA champion Rick Fox and his partners recently made a ploy to regain majority control in Echo Fox, sources said. Echo Fox had previously become a part of Vision Venture Partners, a firm led by formerSan Jose Sharksowner Stratton Sclavos. With Fox back at the helm, Echo Fox is looking to raise capital again, according to sources.
In the past four years, magnates in sports have invested heavily into esports, a trend that started with Fox and others in late 2015. Among them, Harris Blitzer Sports & Entertainment partners Joshua Harris and David Blitzer have been some of the most bullish, making the purchase of Dignitas and Apex in September 2016.
In addition to Dignitas, Harris Blitzer Sports & Entertainment are the owners of the 76ers,New Jersey Devilsand Prudential Center. HBSE are also partners in Crystal Palace, the British soccer team that competes in the Premier League. HBSE is based in Camden -- home of the Sixers' operation base -- and Newark, New Jersey, where Prudential Center is located. On Monday, Prudential Center announced it would host its first esports event, the 2019 Rocket League World Championship.
