Penn Entertainment Set To Acquire Remainder Of Barstool Sports In February

Written By Chris Imperiale on January 5, 2023 - Last Updated on January 13, 2023
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Penn Entertainment is in line to complete its acquisition of Barstool Sports next month, making the media company and Barstool Sportsbook full subsidiaries of Penn. The gaming operator filed its call rights to secure 100% of Barstool in August, with the process finishing up in February.

Penn initially purchased 36% of Barstool Sports in February 2020 for $163 million in total. The company then also paid an additional $62 million to increase its shares to close to 50%.

When the deal finalizes next month, Penn will have dedicated a total of $550 million for the somewhat controversial sports brand.

In November, Penn made other maneuvers to ensure a profitable future. The operator announced that it initiated another share buyback of $750 million two months ago.

The move helps enhance Penn’s stock prices, especially in the first quarter of 2023. It should also prevent any potential takeover attempt from others looking to snag Penn shares at a lower rate.

Penn Entertainment to fully own Barstool Sports

Penn chose to fully commit to its Barstool Sportsbook by completing the acquisition process and shelling out around $387 million more in funding. The Pennsylvania-based brand released the following statement this past summer:

“As previously disclosed, PENN Entertainment, Inc. has call rights with respect to all of the outstanding shares of common stock of Barstool Sports, Inc. not already owned by PENN. PENN has exercised these call rights to bring its ownership of Barstool to 100%. The acquisition of the remaining Barstool shares is expected to be completed in February 2023, after which Barstool will be a wholly-owned subsidiary of PENN.”

Part of Penn’s initial plan was to invest in Barstool in order to reduce marketing costs with the PA online sportsbook. With Barstool already featuring a massive social media following across multiple platforms, Penn wanted to take advantage of this “discounted” advertising.

By earning new customers organically, Penn could save in the long run.

So while this factor still remains, other activity within the sports betting industry may have pushed Penn into making this decision. In July, Penn shut down its theScore Bet gambling application from accepting wagers in the US.

It chose to focus that brand on betting strictly in the Ontario region, while allowing its US efforts to roll completely with Barstool. 

Aside from Barstool appearing to be more popular than theScore in this country, its retail options are producing well. In Q2 of last year, it accepted more than $179 million in handle at its 24 retail sportsbook locations spanning 10 states.

Penn hopes to continue these positive trends and momentum with Barstool into the new year. That includes plans to transition its proprietary software with the Barstool Sportsbook in Q3 of 2023.

$PENN initiates $750 million stock share buyback

More recently, Penn Entertainment performed a share buyback of its own $PENN stock to improve figures. It began a new $750 million buyback in November, which is actually the second time it chose to do so in the previous year.

Penn initially executed the same plan for the same amount in February 2022. Its idea to assist its own stock prices seemed vital as it hasn’t been a good past year for most gaming stocks.

Last year on Jan. 5, Penn’s stock was worth $46.61. However, the price is now down to just $30.82 in January 2023.

The latest $750 million will start to be used once all of the funds from the previous buyback are utilized. There is still about $211 million left over according to Penn’s latest Q3 earnings call.

Penn’s Executive Vice President and CFO, Felicia Hendrix, spoke about this plan to boost the gaming provider’s stock. She said:

“Given our strong financial positioning and our continued belief that there is significant dislocation between our stock price and our intrinsic valuation, we repurchased an incremental 5.35 million shares in the third quarter for $168 million or an average price of $31.40 per share. Subsequent to the end of the quarter, we repurchased an additional 1 million shares for $29.1 million at an average price of $28.95 per share. We currently have $211 million remaining under our $750 million authorization.”

Buyback provides protection for Penn Entertainment

Besides raising the stock price in the short term, these buybacks assist Penn by giving it added protection. When Goldman Sachs reportedly filed a statement that showed the company bought 4.5 million shares (3%) of Penn stock last year, it raised some questions around the industry.

Speculation proceeded about how the investment bank could have purchased the shares for a potential takeover for one of its partners.

By enhancing the stock value, Penn can actively defend itself from others in the sports betting world looking to snag a large portion of its outstanding shares.

Penn facing obstacles with Barstool Sportsbook regarding responsible gambling reqs

As it will soon own 100% of the Barstool brand, Penn is currently being forced to hurdle a few obstacles because of some of the baggage that comes with the media company.

Last month, the Massachusetts Gaming Commission (MGC) handed Penn a temporary retail sports betting license to give them time to perform an investigation. A permanent license is contingent upon the board passing Barstool Sports in a “suitability review.”

Some of this additional attention comes from the New York Times article that discussed Barstool’s President, Dave Portnoy, in a negative light. In the piece, it describes Portnoy as a “degenerate gambler” who has seen plenty of backlash in the mainstream media for actions including sexual assault allegations.

Just to receive the temporary license, Penn and Barstool agreed to certain conditions outside of the further investigation. The MGC required the company to raise the age to attend its live Barstool College Football Show to at least 21 years.

One of these events actually got Barstool into more hot water in Ohio recently, too. The Ohio Casino Control Commission noted that the media company broke multiple rules when it hosted its football show on Toledo’s campus.

Barstool broke violations for advertising at a college and for targeting an underage audience. These infractions could lead to a fine worth up to $250,000.

As for Massachusetts, responsible gaming plans and diversity were two other key points brought up. Prior to Barstool Sportsbook going live in the state, the operator needs to provide the MGC several updates. These include diversity goals and information regarding ongoing investigations.

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Chris Imperiale

Chris Imperiale is the Managing Editor of PlayPennsylvania and covers legal sports betting and casino gambling in Pennsylvania and the Northeast US. He has a journalism degree from Rutgers University and was formerly on staff at Bleacher Report.

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