Penn Entertainment Sells Barstool Sports Back to Dave Portnoy

• Secures ESPN Bet rights for $1.5B

Penn Entertainment Inc. has acquired exclusive rights to the ESPN Bet trademark for online sports betting for $1.5 billion in cash and sold Barstool Sports back to founder Dave Portnoy.

The Philly Business Journal reports Penn Entertainment will make the cash payments to ESPN over the course of the initial 10-year term of the agreement, which can be extended for another 10 years if agreed upon by both parties. It will also grant the sports media company approximately $500 million in warrants to purchase around 31.8 million common shares of Penn stock.

In connection with the ESPN Bet transaction, Penn Entertainment sold 100% of Barstool Sports Inc. to Portnoy. The company did not disclose a sale price but said the deal includes "certain non-compete and other restrictive covenants."

Penn Entertainment announced both deals late Tuesday, with CEO Jay Snowden calling the ESPN Bet agreement "transformative" and a "major milestone" in Penn's growth from a regional gaming company to a leader in entertainment.

"ESPN Bet will be deeply integrated with ESPN’s broad editorial, content, digital and linear product, and sports programming ecosystem. ESPN Bet will also benefit from PENN’s operational experience, extensive market access and proprietary technology platform, which successfully debuted in the U.S. this July," Snowden said in a statement.

Penn Entertainment's online Barstool Sportsbook will be rebranded to ESPN Bet this fall, the company said. The platform, which will be operated by Penn Interactive, will receive exclusive promotional services on ESPN platforms, as well as access to the sports network's talent.

Jay Snowden

The sale of Barstool puts Portnoy back in control of the sports and entertainment content property he built.

"The divestiture allows Barstool to return to its roots of providing unique and authentic content to its loyal audience without the restrictions associated with a publicly traded, licensed gaming company," Snowden said.

As part of the deal, Penn Entertainment has the right to receive 50% of the gross proceeds Portnoy receives from any subsequent sale or "other monetization event of Barstool."

The sale of Barstool comes six months after Penn Entertainment secured the remaining interest in Barstool Sports for $388 million. It first bought a stake in the sports media company in early 2020 for $163 million.

➤ESPN Transaction Highlights:

• Exclusive Right to the #1 U.S. Sports Brand: PENN has secured the exclusive right to the ESPN Bet trademark for OSB in the U.S. for an initial 10-year term which may be extended for an additional 10 years upon mutual agreement
• Launch of ESPN Bet: The online Barstool Sportsbook will be rebranded ESPN Bet in the Fall of 2023; theScore Bet will continue to operate in Canada
• Deep Integration: ESPN Bet, operated by PENN Interactive, will benefit from exclusive promotional services across ESPN platforms including programming, content, and access to ESPN talent
• 
  ESPN Becomes a Highly Aligned, Long-Term Strategic Partner: Agreement enables efficient customer acquisition and retention spend across premier sports content
• Mutually beneficial relationship through ongoing collaboration and warrants
• PENN has agreed to make $1.5 billion in cash payments to ESPN paid over the initial ten-year term and grant ESPN approximately $5001 million of warrants to purchase approximately 31.8 million PENN common shares that will vest ratably over 10 years, in exchange for media, marketing services, brand and other rights provided by ESPN
• Upon ESPN Bet meeting certain U.S. OSB market share performance thresholds, ESPN could receive bonus warrants to purchase up to an additional approximately 6.4 million PENN common shares
• ESPN will have the option, at its discretion, to designate one non-voting Board observer or, upon completion of year 3 of the agreement, designate a Board member subject to satisfying gaming regulatory approval(s) and a minimum ownership threshold
• Significant Value Creation Potential: Provides an estimated $500 million to $1.0 billion+ of annual long-term Adjusted EBITDA potential in our Interactive segment
• Rebranded iCasino Product: Powered by our new promotional engine, our new app will include a separate Hollywood-branded iCasino product in those states where permitted

Jimmy Pitaro, Chairman of ESPN, said, “After meeting with Jay and the PENN team, it was clear that they were the right long-term strategic partner to build ESPN Bet into a leading U.S. sports betting platform. We are confident that the combination of our unparalleled audience along with PENN’s operational expertise and state-of-the-art technology provides us with a tremendous opportunity to serve the ever-growing number of consumers interested in betting.”