Penn National Gaming Takes Minority Stake in Upstart Barstool Sports

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Casino operator Penn National Gaming will take a minority stake in Barstool Sports, the upstart sports site with a flair for the rambunctious, the latest example of how companies that produce content about sports are maneuvering in an era when interactive gaming and betting are seen as growing lines of business.

Under terms of the deal, Penn National will acquire a 36% interest stake in Barstool for approximately $163 million in cash and convertible preferred stock. The casino operator gets the exclusive right to use the Barstool brand for all of its online and retail sports betting products. The Chernin Group, which currently owns Barstool, will be left with a 36% interest in the company, while the remaining shares will be held by employees, including founder Dave Portnoy (above, pictured) and CEO Erika Nardini.

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The deal is expected to close in the first quarter of 2020.

Penn sees its Barstool buy as a means of helping the company get more scale and advantage in what its executives believe will within five years be a $10 billion business as more state regulators start to allow interactive gaming. Penn believes acquiring Barstool “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,” said Jay Snowden, president and CEO of Penn National, in a statement.

After three years, Penn National will increase its ownership to approximately 50% with an investment of approximately $62 million. 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.

Barstool has gained traction by indulging in raw takes on sports and culture, the feeling of its executives being that fans want to hear passionate talk about the topics that fascinate them. That chatter might take the form of spirited analysis of a game highlight, or random remarks about whatever is occupying Barstool editorial staffers. After the Penn National deal was announced, one Barstool employee posted a video of WWE personality Ted DiBiase singing a song about money, while another posted a take on eight movies about the moon.

Penn executives expect the site to keep that spirit, but will be mindful about the propriety of its content, says Jon Kaplowitz, head of Penn National’s interactive division. “They have a very authentic voice,” he says in an interview. “They have made some inappropriate comments over the last few years,” but “we have done our due diligence” and the company is “confident” that Barstool has “the right guardrails in place.” Because top Barstool employees will become equity holders in Penn National, Kaplowitz says, “we are all investing in making sure that happens.”

“I think you won’t see any diminishment or reduction in teh breadth of the content,” says Mike Kerns, a partner in The Chernin Group. “If anything, you will see more sports-betting related content, but that’s already been an investment area.”

Many of the nation’s big media companies have already started to talk about wagering on sports. Fox Corp. last May struck a deal to take a small stake in Stars Group that resulted in Stars’ ability to run gaming with Fox intellectual property attached to some of its concepts. Both Fox Sports 1 and ESPN run daily weekday shows devoted to gaming and gambling. During NBC Sports’ broadcast of the Kentucky Derby last May — one of the premier events in its portfolio of sports rights — the network launched its first betting program, streamed online and via its mobile app. Handicapper Eddie Olczyk offered his picks for the race. WarnerMedia’s Turner Sports teamed up with MGM Resorts to display odds on various shots being taken in its pay-per-view matchup between golfers Tiger Woods and Phil Mickelson. Both ESPN and Turner’s Bleacher Report have struck deals to launch production studios at Caesars Entertainment properties to create content about sports betting.



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