ESPN and PENN Entertainment Complete Sports Betting Deal, Dave Portnoy Buys Back Barstool Sports

PENN Entertainment (PENN) is up as much as 25% late Tuesday after the company and ESPN (DIS) announced a blockbuster sportsbook deal that will officially see ESPN enter the sportsbook.

As part of the agreement, the companies will launch a branded sportsbook, ESPN BET, this fall in the 16 states where PENN currently operates mobile sportsbooks. Under the terms of the agreement, PENN will pay ESPN $1.5 billion over the next ten years, with ESPN holding warrants to purchase approximately 32 million shares of PENN worth $500 million that will vest over the same period .

ESPN’s entry into sports gambling was the most anticipated shoe in the fast-growing industry. Market leaders FanDuel and DraftKings previously advertised on ESPN to showcase their odds and products to sports fans. As the network, which bills itself as “the world’s leading sports provider,” officially selected an exclusive partner, DraftKings shares fell nearly 10% in after-hours trading.

ESPN’s parent company Disney (DIS) is expected to report earnings on Wednesday after the market close.

As part of the announcement, Peen announced that it had sold Barstool Sports back to its founder, Dave Portnoy. Penn first acquired a 36 percent stake in Barstool for $163 million in 2019; Earlier this year, the company bought the remainder of Barstool for an additional $388 million.

Dave Portnoy of Barstool Sports is present during the UFC 281 event at Madison Square Garden on November 12, 2022 in New York City. (Photo by Jeff Bottari/Zuffa LLC)

In a press release, ESPN said that ESPN BET will become the network’s exclusive sportsbook and PENN Entertainment will receive “odds attribution, advertising services including digital product integrations, traditional media and content integrations, and ESPN talent access, as well as other co-generated services” to ensure maximum fan exposure from ESPN BET.”

ESPN Chairman Jimmy Pitaro said in a press release, “The strategy here is simple: give fans what they have asked for and come to expect from ESPN. PENN Entertainment is the perfect partner to create an unparalleled sports betting user experience with ESPN BET.”

ESPN President Jimmy Pitaro warms up before catching a ceremonial first pitch before a game between the Boston Red Sox and the New York Yankees September 8, 2019 at Fenway Park in Boston, Massachusetts. (Photo by Billie Weiss/Boston Red Sox/Getty Images)

This is breaking news. There’s more to come.