DAUPHIN COUNTY — Penn National Gaming Inc. announced Wednesday that it has entered an agreement to purchase 36 percent interest in Barstool Sports, the digital sports media company known for its searing hot sports takes and outspoken fanbase.
Under the agreement, Penn National Gaming will be Barstool Sports’ exclusive gaming partner for up to 40 years and will have the sole right to use its brand for all online and retail sports betting and iCasino products.
The deal is worth $163 million in cash and convertible preferred stock, Penn National Gaming said in a press release.
“This exciting new partnership with Barstool Sports reflects our strategy to continue evolving from the nation’s largest regional gaming operator, with 41 properties in 19 states, to a best-in-class omni-channel provider of retail and online gaming and sports betting entertainment,” said Jay Snowden, President and Chief Executive Officer of Penn National, in the release. “With its leading digital content, well-known brand, and deep roots in sports betting, Barstool Sports is the ideal partner for Penn National and will enable us to attract a new, younger demographic, which will nicely complement our existing customer database.
“In addition, with 66 million monthly unique visitors, we believe the significant reach of Barstool Sports and loyalty of its audience will lead to meaningful reductions in customer acquisition and promotional costs for our sports betting and online products, significantly enhancing profitability and driving value for our shareholders.”
Penn National Gaming expects to close the transaction in the first quarter of 2020, subject to customary closing conditions set forth in the purchase agreement.
“Barstool Sports is a dynamic content company that has grown into a media juggernaut thanks to some of the best talent and fans in the world,” said Barstool Sports CEO Erika Nardini. “Over the last five years, Barstool Sports has brought its audience, creativity and expertise to the biggest sports betting and DFS operators in the country with great results. The chance to combine our content and fans with Penn National’s massive footprint, and to develop a unique and compelling omni-channel approach together, was for us a no brainer.”
Barstool Sports was founded in 2003 as a sports blog in Boston by Dave Portnoy.
“This opportunity is a dream of mine and why I started Barstool Sports in the first place,” he said in the press release announcing the deal. “Barstool Sports has a deep sports and gaming history and from the moment we met Jay and the Penn National team we knew this could be an exciting and game changing partnership and we can’t wait to get started. I think with our shared vision and goals, we are uniquely positioned to be a leader in this business.”
Penn National’s initial investment for 36% of the equity of Barstool Sports is comprised of approximately $135 million in cash and $28 million in shares of non-voting convertible preferred stock, the announcement said.
After three years, Penn National will increase its ownership to approximately 50% with an incremental investment of approximately $62 million, consistent with the implied valuation at the time of the initial purchase.
Under the terms of the agreement, Penn National has immediately exercisable call rights, and the existing Barstool Sports shareholders have put rights exercisable beginning three years from closing, for the remaining Barstool Sports shares based on a fair market value calculation to be performed at the time of exercise. Penn National also has the option to bring in another partner who would acquire a portion of Penn National’s shares of Barstool Sports. Penn National will have customary governance rights, including initially two seats on Barstool Sports’ seven-member board of directors.
Following the close of the transaction, entities affiliated with The Chernin Group, which previously owned approximately 60% of Barstool Sports, will own 36% of Barstool Sports, and the remaining 28% will be held by Barstool Sports’ employees, including Portnoy and Nardini.
