Penn Entertainment Tuesday afternoon announced an agreement with one of the country’s biggest sports brands, and the divesture of another brand it once boasted would be a boon for the company.
The Pennsylvania-based operator is entering into an exclusive online sports betting agreement with ESPN and ESPN Enterprises to launch ESPN Bet. Penn also announced that it has sold 100% of Barstool Sports common stock to David Portnoy in exchange for certain non-compete and other restrictive covenants. Penn also has the right to receive 50% of the gross proceeds received by Portnoy in any subsequent sale or other monetization event of Barstool.
Penn completed its acquisition of Barstool in February 2023.
Penn will make $1.5 billion in cash payments to ESPN paid over the initial ten-year term, and grant ESPN approximately $500 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.
“This transformative, exclusive agreement with ESPN marks another major milestone in Penn’s evolution from a pure-play U.S. regional gaming operator to a North American entertainment leader,” said Penn Entertainment CEO Jay Snowden in a statement. “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.”
“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,” said ESPN Chairman Jimmy Pitaro. “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.”
Snowden noted that Barstool helped Penn scale its digital footprint across 16 U.S. jurisdictions.
“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.
In November 2022, the New York Times published an in-depth story about Portnoy’s alleged misdeeds. During Penn’s 2023 first quarter earnings call, Snowden noted that an incident involving Barstool personality Ben Mintz, who uttered a racial slur while on a broadcast, was dealt with “appropriately.”
“And I would also say that you’ve been following us and the relationship, and I think the public markets and financial community has gotten to know Barstool pretty well over the last three years, and there’s going to be some drama sometimes,” Snowden said during the earnings call. “There’s going to be some things that pop up here and there, and we’ll manage through those as we always have.”
Further details of the transactions will be revealed Wednesday at 9 a.m. ET during a previously scheduled conference call to discuss Penn’s 2023 second quarter results.