Penn National Buys theScore in $2 Billion Cash & Stock Deal

Penn National Buys theScore in $2 Billion Cash & Stock Deal
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Penn National Gaming is buying Score Media and Gaming’s theScore, a Toronto-based digital media and sports betting company, for about $2 billion in cash and stock, the companies announced Thursday.

The announcement comes just ahead of Penn National reporting second-quarter earnings and as Canada is progressing on launching its single-event sports betting market this year.

Jay Snowden, Penn National president and chief executive officer, said in a news release that with the transaction, the company would be “uniquely positioned to seamlessly serve our customers with the most powerful ecosystem of sports, gaming and media in North America.”

John Levy, chairman and chief executive officer of theScore, pointed to what the deal means for the company and online sports betting when Canada launches its market.

“We’ve built an innovative, technology-led integrated media and gaming business that has us poised for success across North America, including the highly anticipated upcoming rollout of commercial sports betting in Canada,” Levy said in the release. “With Penn’s support, we will continue to invest in building our Canadian operations, growing our footprint and expanding our workforce.”

Under the agreement, theScore shareholders will receive $17 in cash and 0.2398 shares of Penn National common stock for each theScore share, a news release said. That comes to a purchase price of about $34 per theScore share based on Penn National’s five-day average trading price (volume weighted) as of July 30.

Penn National said theScore will continue as a stand-alone company with its headquarters in Toronto under the same leadership team. Branding of TheScore app will stay the same.

The release said the transaction has already been approved by the companies’ boards of directors and is expected to close in the first quarter of 2022, the release said. Once complete, Penn National and theScore shareholders will have about 93% and 7% of the outstanding shares.

Penn National said it expects to fund the $1 billion cash payout using existing cash.

“We are thrilled to be acquiring theScore, which is the number one sports app in Canada and the third most popular sports app in all of North America,” Snowden said in the release. “theScore’s unique media platform and modern, state-of-the-art technology is a powerful complement to the reach of Barstool Sports and its popular personalities and content.

”Users will enjoy a unique mobile sports betting and iCasino platform with highly customized bets and enhanced in-gaming wagering opportunities, along with highly engaging, personalized sports and entertainment content, and real-time scores and stats.”

Technology Key Component of the Deal

Snowden pointed out that the deal gives Penn National “a path to full control of our own tech stack.”

”theScore has developed a state-of-the-art player account management system and is finalizing the development of an in-house managed risk and trading service platform,” Snowden said. “This should lead to significant savings in third party platform costs and allow us to broaden our product offerings — providing the missing piece for operating at what we expect to be industry-leading margins.

”In addition to the synergies, we’ll be gaining access to theScore’s deep pool of product and engineering talent and data-driven user analytics, which will help drive our customer acquisition, engagement, retention strategies and cash flows.”

Jon Kaplowitz, head of Penn Interactive, said the deal would allow the company to have greater ability to innovate.

Previous Agreement Helped Lead to Deal

In July 2019, theScore and Penn National entered into a 20-year agreement that gave theScore online access to 11 states for its sports betting platform.

theScore received “first skin” access rights in Louisiana and Mississippi; “second skin” access rights in Indiana, Iowa, Missouri, Ohio and Texas; and “third skin” access rights in Michigan, Massachusetts, Maine and Kansas, according to the agreement.

At the time, Levy said theScore was “thrilled that Penn National believes in, and has invested in, our vision of an integrated approach to media and sports betting.”

Penn National & Barstool

In January 2020, Penn National purchased a 36% interest in the sports media platform Barstool Sports. Penn National paid $163 million in cash and convertible stocks.

Since the deal, the Barstool Sportsbook app has gone live in Pennsylvania, Michigan, Illinois and Indiana. It is expected to launch in Virginia this month.

The combination of Barstool Sports and theScore gives Penn National a much stronger North American media platform.

"I'm super excited. Our influence is really, really big and I think its so synergistic to what they do and what we do," Barstool Sports founder Dave Portnoy said on a conference call Thursday. "I have been a huge fan of theScore and downloaded their app like 10, 15 years ago and have used it forever. We are going to turn that faucet on and turn it up 10 times or 20 times. It's the perfect synergistic company for all involved."

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