Penn Entertainment shares rise after gambling group inks partnership with ESPN
Investing.com -- Shares of Penn Entertainment (NASDAQ:PENN) soared in premarket trading Wednesday after the company announced it entered into an exclusive U.S. online sports betting agreement with Disney's (NYSE:DIS) ESPN unit.
Under the terms of the agreement, Penn has secured the exclusive right to the ESPN Bet trademark for online sports betting in the U.S. for an initial 10-year term.
Barstool Sportsbook - the sports gambling portal owned by Penn - will subsequently be rebranded ESPN Bet in the fall. Meanwhile, ESPN Bet will have exclusive promotional advantages throughout the sports network's platforms.
Penn will pay ESPN $1.5 billion in cash over a decade and grant $500 million worth of warrants for about 31.8M Penn common shares.
Penn said the deal will provide an estimated $500 million to $1 billion or more in annual long-term adjusted earnings before interest, tax, depreciation and amortization potential to its interactive segment.
In a statement, Penn Chief Executive Officer and President Jay Snowden said the move will give Penn access to ESPN's "broad editorial, content, digital and linear product."
In a note to clients, analysts at Deutsche Bank said they expect the jump in Penn shares to be "short lived," arguing "when it comes to digital, investors will likely need to see the thesis prove out, at least in some fashion, before applying considerable credit to the partnership and the fruits of it."
Also on Tuesday, Penn announced that it sold Barstool Sports back to founder David Portnoy in exchange for "certain non-compete and other restrictive covenants.”
The move comes after Penn, which took a minority stake in Barstool Sports in 2020, purchased the remaining shares in the sports and pop culture website it did not already own earlier this year. Portnoy said in a post that Barstool and Penn had "gone our separate ways."
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