Penn National proved two things with its $2 billion acquisition of Score Media, operators of theScore Bet app, to complement Barstool Sportsbook:
- Penn is focused on building more than just a sportsbook product with its stake in Barstool Sports. theScore is one of the leading sports media apps in the market. That will mesh well with Barstool’s aspirations of becoming a major media operator in its own right.
- Valuations of anything that include US sports betting are absolutely nuts right now.
The acquisition appears to be priced entirely on potential. Score Media reported a negative EBITDA of $34.5 million, on $16.4 million of revenue through the first nine months of fiscal 2021.
Penn, meanwhile, sees Score turning adjusted EBITDA positive by year two, growing to more than $200 million in the medium term by 2026 and $500 million over the long term.
“We are thrilled to be acquiring theScore, which is the number one sports app in Canada and the third most popular sports app in all of North America,” said Penn CEO Jay Snowden. “theScore’s unique media platform and modern, state-of-the-art technology is a powerful complement to the reach of Barstool Sports and its popular personalities and content.”
Five launches coming quickly for Barstool Sportsbook
Penn long has targeted at least 10 states to be live by the end of 2021, though only four are live:
The app should launch in five more states within the next five weeks before NFL betting season kicks off Sept. 9:
Penn likely has seen the success of the FanDuel Sportsbook same-game parlay. Barstool Sportsbook will launch its own version of that at some point before the end of September. DraftKings Sportsbook also announced Thursday it will offer same-game parlays through its data deal with Genius Sports.
Additionally, Barstool-branded sports bars should open in Chicago and Philadelphia later this year.
Will Barstool Sportsbook change after acquisition?
Barstool Sportsbook will bring all of its betting technology in-house following the acquisition, though not all that tech is finished.
theScore Bet has a player account management (PAM) system and is still working on its proprietary sportsbook platform. Bally’s bought its current provider, Bet.Works, over the summer.
That means Barstool will eventually move from the Kambi platform. That was a big part of the acquisition, according to Barstool Sports founder Dave Portnoy.
Whither Kambi?
Unsurprisingly, Kambi CEO Kristian Nylén disagreed with the move:
“I congratulate Penn National Gaming on today’s acquisition of theScore. While I respectfully disagree with Penn National Gaming’s long-term view on vertical integration, the entity they have acquired has yet to develop a proprietary sportsbook, and certainly not one to a similar high standard as what we offer. The transactions announced today creates some exciting opportunities for Penn National Gaming and I look forward to working with them over the coming years in support of their sportsbook growth.”
Kambi will feel no financial impact for the unspecified duration of its contract with Penn, the company said.
Timeline for changes
There is still plenty of time before the Barstool Sportsbook app sees any major changes. The acquisition is scheduled to close in the first quarter of 2022.
That is also around the time sports betting in Ontario should be live, where theScore Bet will be ready to go on day one. That will remain the consumer-facing brand in Canada because of the company’s existing popularity there.
The launch in Ontario, which Snowden expects to be a busy time for theScore, will demonstrate the capabilities of the platform before it moves to the US.
Snowden noted the 18-month transition for DraftKings and SBTech and assumes a similar timeline for Barstool Sportsbook. He added Penn is “highly confident” the change will happen before the 2023 football season.
Penn boasts ‘volumetric savings’
The acquisition could save Penn a pretty penny when it comes to traditional advertising in the future, according to Portnoy.
It should also help with user cost per acquisition. Bettors using theScore Bet that 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.
Penn also noted other savings:
“This broader reach will provide volumetric savings for content fees, payment expenses, and other services, including the elimination of public company costs.”
Bringing tech in-house and those other savings will account for about $90 million of the expected $200 million adjusted EBITDA increase by 2026. The remaining $110 million is based on new verticals and enhanced customer acquisition and retention.
Details of Score Media acquisition
Here are the pertinent details of the purchase:
- Penn will pay $17 in cash and 0.2398 PENN shares for each share of Score Media. Based on the five-day average price since July 30, that is an offer of $34 per share. That represents a more than 87% premium from Wednesday’s closing price of $18.14.
- Penn will pay the roughly $1 billion in cash from its balance sheet. The company reported $2.3 billion in cash and equivalents as of June 30. The transaction should be neutral on Penn’s lease-adjusted net leverage, which was 4.0 times June 30.
- Score Media CEO John Levy and COO Benjie Levy are staying on board and will continue to oversee operations in Ontario.
