PENN Entertainment Stock Soars On ESPN Deal, Selling Barstool Sports Back To Dave Portnoy: The Details

PENN Entertainment Inc PENN shares are rising after the close on Tuesday on the heels of a deal with Walt Disney Co's DIS ESPN.

What Happened: Penn Entertainment entered into an exclusive U.S. online sports betting agreement with ESPN.

As part of the deal, Penn has secured exclusive rights to the ESPN Bet trademark for online sports betting in the U.S. for an initial 10-year term which may be extended for an additional 10 years upon mutual agreement. The Barstool Sportsbook will be rebranded to ESPN Bet in the fall. 

PENN also sold 100% of the Barstool Sports Inc common stock back to Dave Portnoy in exchange for certain non-compete and other restrictive covenants.

ESPN Bet will benefit from exclusive promotional services across ESPN platforms and enable customer acquisition and retention spend across premier sports content. 

Penn will pay ESPN $1.5 billion for the initial 10-year term and grant ESPN approximately $500 million in warrants to purchase 31.8 million shares of Penn common stock in exchange for media, marketing services, brand and other rights provided by ESPN.

ESPN could also receive bonus warrants to purchase up to an additional approximately 6.4 million shares based on performance. 

Penn estimates that the deal adds $500 million to $1 billion of annual long-term adjusted EBITDA potential. 

"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 Jay Snowden, president and CEO of Penn.

"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."

The company said it would discuss the transaction on its previously scheduled conference call set for 9 a.m. Wednesday morning. Penn is due to report earnings ahead of the call. 

Related Link: PENN Entertainment Q2 Earnings Preview: Earnings Estimates, Analyst Targets, And Key Metrics To Watch

PENN Price Action: Penn shares were up 88.8% after hours at $29.49 at the time of publication, according to Benzinga Pro.

Photo: Dawn from Pixabay.