Penn National Paying $163 Million for Barstool Sports Minority Stake, Could Eventually Become Outright Owner

Posted on: January 28, 2020, 11:47h. 

Last updated on: January 29, 2020, 09:08h.

Todd Shriber @etfgodfather Read More
Expertise: Financial, Gaming Business, Mergers and Acquisitions.

Penn National Gaming (NASDAQ: PENN), one of the largest regional gaming companies, will reportedly dole out $163 million to take a 36 percent position in David Portnoy’s Barstool Sports, a brash sports and pop culture blog.

Barstool founder David Portnoy will be able to afford a lot more pizza if reports of Penn National acquiring part of his firm are accurate. (Image: Daily Mail)

The deal ends nearly three weeks of speculation that the owner of the Tropicana on the Las Vegas Strip was eyeing Barstool. Under the terms of the transaction, Penn National will pay $135 million in cash and $28 million worth of stock for the interest in the media company. That values it at $450 million, reports Dow Jones Newswires, which cited unidentified sources with knowledge of the matter.

In three years, the operator of casinos under the Argosy and Hollywood brands, among others, will increase its Barstool stake to 50 percent for another $62 million payment. There are kickers and sweeteners in the deal terms that could lead to the gaming company eventually taking full control of media concern.

A request for comment to a Penn National executive from Casino.org wasn’t responded to prior to publication of this article. The company is based in Pennsylvania.

Everyone’s Happy?

With the $450 million valuation, Portnoy isn’t the only one reaping a windfall. The Chernin Group (TCG), a California-based investment firm specializing in media companies, made a $25 million investment in Barstool in 2016 and 2018, valuing the media property at $10 million to $15 million, and then at $100 million.

For Penn National, the company gets access to Barstool fans and readers – 66 million, according to Dow Jones – many of whom are younger, web-savvy gamblers looking to place sports bets online or with mobile devices.

Via advertising, merchandise sales and its betting contests, Barstool generated $90 million to $100 million in revenue last year, reports the Wall Street Journal. Assuming that number is accurate, the media group would be a small, but potentially potent part of Penn National’s portfolio. The company posted third-quarter turnover of $1.35 billion.

Portnoy, famous for his pizza affinity and abrasive, controversial viewpoints, is expected to stay with the company following the Penn deal.

Probably Not The Last

The possible Penn/Portnoy marriage isn’t the first of its kind. In an effort to leverage its FoxBet brand, Fox Sports took a five percent stake in The Stars Group (TSG) last year.

One media report out late Tuesday anointed daily fantasy sports (DFS) companies DraftKings and FanDuel as winners in the Penn/Barstool deal.

For FanDuel, that’s not an unreasonable theory, because it’s already widely known that its parent company – Flutter Entertainment Plc – is trying to acquire TSG for $12.2 billion. Assuming that deal is consummated, it could give FanDuel some access to FoxBet.

As for DraftKings, that company has been mentioned as a potential takeover target. But for a gaming company looking to fill in online betting and sports wagering voids, not necessarily for a traditional media company.