Penn National Gaming Announces Purchase of Score Media and Gaming

On Thursday, Penn National Gaming announced its intention to purchase Canadian sports betting firm Score Media and Gaming for almost $2 billion in cash and stock. The transaction, which will further position Penn as one of the major players in a rapidly expanding sports betting industry, is expected to close in the first quarter of 2022. Penn National also purchased the Barstool Sports application for $450 million in 2020. On the heels of new sports betting bill in Canada, Penn Gaming is making a strong play to expand its sports betting reach across North America.

New Sports Betting Bill in Canada

On June 22, 2021, the Canadian Senate passed C-218, a bill that will allow for single-game sports betting in the country to be regulated on a province-by-province basis similar to how the United States is currently operating. The bill received royal assent on June 30 and Prime Minister Justin Trudeau is expected to set an effective launch date for sports betting in late 2021. Previously, only parlay betting was allowed in Canada, but this bill will allow for greatly expanded sports betting market including single-game wagers.

theScore History

theScore was founded by John S. Levy, current CEO and Chairman, in 2012 as a digital media company based in Toronto, Canada. Later in 2012, Rogers Communications purchased The Score Television Network for $167 million, leaving theScore to embark on their digital-based outlets. Levy has since built theScore into a media company with a massive user base, particularly in Canada, and has leveraged that consumer base into a competitive sports betting business. theScore Bet app launched in 2019 and on March 16, 2021, theScore joined the Nasdaq.

Partnership Details

theScore offers Penn National Gaming a unique platform for vertical integration and key synergies in the sports betting industry. Penn CEO Jay Snowden said the acquisition affords his company “significant savings in third-party platform costs and allows [them] to broaden [their] product offerings – providing the missing piece for operating at what we expect to be industry-leading margins.”

The partnership offers Penn Gaming significant reach in North American given how well-positioned theScore is in the Canadian market. It also offers Penn Gaming access to theScore’s “deep pool of product and engineering talent and data-driven user analytics” to help drive its “customer acquisition, engagement, retention strategies, and cash flows.” Penn National estimates the acquisition will grow its EBITDA by $200 million in the next four years and up to $500 million in the long term.

Will This Affect Barstool Sportsbook?

Barstool Sportsbook is expected to launch in Arizona, Colorado, New Jersey, Tennessee, and Virginia by the start of the NFL season on September 9. Barstool uses Kambi as its betting platform, but theScore Bet has its own player account management (PAM) system and a provider Bet.Works owned by Bally’s. Kambi CEO Kristian Nylen disagreed with this move, saying theScore “has yet to develop a proprietary sportsbook, and certainly not one to a similar high standard as what [Kambi] offers.”

With the integration of theScore with Penn National, the primary provider for Barstool Sportsbook is expected to change by the start of the 2023 NFL season. This should help Barstool Sportsbook with user cost per acquisition as bettors using theScore Bet who also have theScore’s media app have 88% higher handle per user, place three times more bets, and generate a 91% increase in retention after a month. It should also help Barstool Sportsbook and Penn National decrease future traditional advertising costs, as Barstool CEO Dave Portnoy noted on Twitter.

There is nobody else who does what they do. The Score was 1st company I tried to acquire when Chernin invested in us. Couldn’t afford it. It is the perfect compliment for us. Tech, market, mind space. We will control the entire ecosystem with their help from tech to media https://t.co/StvbbVCwJm

— Dave Portnoy (@stoolpresidente) August 5, 2021

Stock Implications

As part of this purchase, Score Media shareholders will get $17 in cash and 0.2398 shares of Penn National Gaming for each share of Score held. That represents a per-share value of $34 or 87% more than the stock’s close on Wednesday. As such, there was significant movement on Thursday – Score Media closed at $32.64, up 79.93%, on Thursday following the announcement of Penn’s purchase. Penn National Gaming, Inc. closed at $72.26 on Thursday, up 9.09%.