PENN Entertainment and ESPN Enter into Long-Term Exclusive Strategic Alliance for U.S. Online Sports Betting
- Exclusive right to ESPN Bet trademark for OSB in the US
- $1.5 billion in cash payments to ESPN over 10 years
- Estimated $500 million to $1.0 billion+ of annual long-term Adjusted EBITDA potential
- Divestiture of Barstool Sports to founder David Portnoy
ESPN Transaction Highlights:
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Exclusive Right to the #1
U.S. Sports Brand: PENN has secured the exclusive right to the ESPN Bet trademark for OSB in theU.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
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ESPN Becomes a Highly Aligned, Long-Term Strategic Partner: Agreement enables efficient customer acquisition and retention spend across premier sports content
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Mutually beneficial relationship through ongoing collaboration and warrants
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PENN has agreed to make
in cash payments to ESPN paid over the initial ten-year term and grant ESPN approximately$1.5 billion 1 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$500 -
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
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PENN has agreed to make
- 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
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Mutually beneficial relationship through ongoing collaboration and warrants
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Significant Value Creation Potential: Provides an estimated
to$500 million billion+ of annual long-term Adjusted EBITDA potential in our Interactive segment$1.0 -
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
Barstool Divestiture
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PENN Divests Barstool Sports to Founder David Portnoy: PENN sold
100% of the Barstool Sports, Inc. (“Barstool”) common stock to David Portnoy in exchange for certain non-compete and other restrictive covenants. PENN also has the right to receive50% of the gross proceeds received by David Portnoy in any subsequent sale or other monetization event of Barstool
Jay Snowden, Chief Executive Officer and President of PENN, commented, “This transformative, exclusive agreement with ESPN marks another major milestone in PENN’s evolution from a pure-play
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
Mr. Snowden continued, “In connection with the transaction, we are selling Barstool back to founder David Portnoy. Barstool has been a great partner and we are thankful to Dave Portnoy, Erika Ayers, Dan Katz and their team for helping to rapidly scale our digital footprint across 16 jurisdictions in the
“Our agreement with ESPN will provide us access to the largest ecosystem in sports, with 105 million+ monthly unique digital visitors, an audience of more than 370 million across social platforms, 25 million ESPN+ subscribers, and the nation’s #1 fantasy database. PENN’s ability to leverage the leading sports media brands in both the
Non-GAAP Financial Measures
The Non-GAAP Financial Measures used in this press release include Adjusted EBITDA. This non-GAAP financial measure should not be considered a substitute for, nor superior to, financial results and measures determined or calculated in accordance with GAAP.
We define Adjusted EBITDA as earnings before interest expense, net; interest income; income taxes; depreciation and amortization; stock-based compensation; debt extinguishment charges; impairment losses; insurance recoveries, net of deductible charges; changes in the estimated fair value of our contingent purchase price obligations; gain or loss on disposal of assets; the difference between budget and actual expense for cash-settled stock-based awards; pre-opening expenses; non-cash gains/losses associated with REIT transactions; non-cash gains/losses associated with partial and step acquisitions as measured in accordance with ASC 805 “Business Combinations”; and other. Adjusted EBITDA is inclusive of income or loss from unconsolidated affiliates, with our share of non-operating items (such as interest expense, net; income taxes; depreciation and amortization; and stock-based compensation expense) added back for Barstool (prior to our acquisition of Barstool on February 17, 2023) and our Kansas Entertainment, LLC joint venture. Adjusted EBITDA is inclusive of rent expense associated with our triple net operating leases with our REIT landlords. Although Adjusted EBITDA includes rent expense associated with our triple net operating leases, we believe Adjusted EBITDA is useful as a supplemental measure in evaluating the performance of our consolidated results of operations.
Adjusted EBITDA has economic substance because it is used by management as a performance measure to analyze the performance of our business, and is especially relevant in evaluating large, long-lived casino-hotel projects because it provides a perspective on the current effects of operating decisions separated from the substantial non-operational depreciation charges and financing costs of such projects. We present Adjusted EBITDA because it is used by some investors and creditors as an indicator of the strength and performance of ongoing business operations, including our ability to service debt, and to fund capital expenditures, acquisitions and operations. These calculations are commonly used as a basis for investors, analysts and credit rating agencies to evaluate and compare operating performance and value companies within our industry. In order to view the operations of their casinos on a more stand-alone basis, gaming companies, including us, have historically excluded from their Adjusted EBITDA calculations certain corporate expenses that do not relate to the management of specific casino properties. However, Adjusted EBITDA is not a measure of performance or liquidity calculated in accordance with GAAP. Adjusted EBITDA information is presented as a supplemental disclosure, as management believes that it is a commonly used measure of performance in the gaming industry and that it is considered by many to be a key indicator of the Company’s operating results.
Adjusted EBITDA is not calculated in the same manner by all companies and, accordingly, may not be an appropriate measure of comparing performance among different companies.
The Company does not provide a reconciliation of projected Adjusted EBITDA because it is unable to predict with reasonable accuracy the value of certain adjustments that may significantly impact the Company’s results, including realized and unrealized gains and losses on equity securities, re-measurement of cash-settled stock-based awards, contingent purchase payments associated with prior acquisitions, and income tax (benefit) expense, which are dependent on future events that are out of the Company’s control or that may not be reasonably predicted.
Management Presentation, Conference Call, Webcast and Replay Details
PENN is hosting a conference call and simultaneous webcast at 9:00 am ET tomorrow, both of which are open to the general public. During the call, management will review a presentation regarding the transaction with ESPN that can be accessed at https://investors.pennentertainment.com/events-and-presentations/presentations.
The conference call number is 212-231-2913; please call five minutes in advance to ensure that you are connected prior to the presentation. Interested parties may also access the live call at www.pennentertainment.com; allow 15 minutes to register and download and install any necessary software. Questions and answers will be reserved for call-in analysts and investors. A replay of the call can be accessed for thirty days at www.pennentertainment.com.
This press release is available on the Company’s web site, www.pennentertainment.com, in the “Investors” section (select link for “Press Releases”).
About PENN Entertainment
PENN Entertainment, Inc., together with its subsidiaries (“PENN,” the “Company,” “we,” “our,” or “us”), is North America’s leading provider of integrated entertainment, sports content, and casino gaming experiences. As of June 30, 2023, PENN operated 43 properties in 20 states, online sports betting in 17 jurisdictions and iCasino in five jurisdictions, under a portfolio of well-recognized brands including Hollywood Casino®, L’Auberge®, Barstool Sportsbook® and theScore Bet Sportsbook and Casino®. In August 2023, PENN entered into a transformative, exclusive long-term strategic alliance with ESPN, Inc. and ESPN Enterprises, Inc. (together, “ESPN”) relating to online sports betting within
About ESPN
ESPN, Inc. is the leading multinational, multimedia sports entertainment company featuring the broadest portfolio of multimedia sports assets with over 50 business entities. Reaching fans across television, digital media, audio, print and more, it has unparalleled scope, scale, consumption and brand strength. Based in
Forward Looking Statements
This press release contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These statements can be identified by the use of forward-looking terminology such as “expects,” “believes,” “estimates,” “projects,” “intends,” “plans,” “goal,” “seeks,” “may,” “will,” “should,” or “anticipates” or the negative or other variations of these or similar words, or by discussions of future events, strategies or risks and uncertainties. Specifically, forward-looking statements include, but are not limited to, statements regarding: future Adjusted EBITDA; the inclusion of a
Such statements are all subject to risks, uncertainties and changes in circumstances that could significantly affect the Company’s future financial results and business. Accordingly, the Company cautions that the forward-looking statements contained herein are qualified by important factors that could cause actual results to differ materially from those reflected by such statements. Such factors include: the effects of economic and market conditions in the markets in which the Company operates; competition with other entertainment, sports content, and casino gaming experiences; the timing, cost and expected impact of product and technology investments; risks relating to international operations, permits, licenses, financings, approvals and other contingencies in connection with growth in new or existing jurisdictions; the Company may not be able to achieve the anticipated financial returns from the Sportsbook Agreement with ESPN, including due to fees, costs, taxes or circumstances beyond the Company’s or ESPN’s control; the rebranding of the Barstool Sportsbook as ESPN Bet or the inclusion of
1 Calculation is based on inputs agreed upon and contained within the investment agreement which may be different from the Company’s valuation in accordance with ASC 718 “Compensation—Stock Compensation.”
View source version on businesswire.com: https://www.businesswire.com/news/home/20230808765627/en/
Mike Nieves
SVP, Finance & Treasurer
PENN Entertainment
610-373-2400
Joseph N. Jaffoni, Richard Land
JCIR
212-835-8500 or penn@jcir.com
Source: PENN Entertainment, Inc.