ESPN and PENN Entertainment Sign $2 Billion Sports Betting Deal, Dave Portnoy Buys Barstool Sports

ESPN and PENN Entertainment (PENN) announced a massive deal Tuesday that will see ESPN operate branded sportsbooks, as the global sportsbook company makes its biggest push yet into the sports gambling market.

As part of the deal, the two companies will launch a branded sportsbook, ESPN BET, this fall in the 16 states where PENN currently operates mobile sportsbooks. PENN will pay ESPN $1.5 billion over the next 10 years while ESPN will grant warrants for 31.8 million shares of PENN worth $500 million, which will vest within the same period.

PENN Entertainment stock rose 25% late Tuesday in the wake of the news. ESPN’s parent company, Disney (DIS), is set to report earnings after the bell on Wednesday.

As part of the announcement, PENN also said it sold Barstool Sports to its founder, Dave Portnoy. PENN initially purchased a file 36% stake in Barstool for $163 million in 2019; Earlier this year, the company Sold Barstool credits an additional $388 million.

PENN said in a press release Tuesday that the company “also has the right to receive 50% of the total proceeds received by David Portnoy in any subsequent sale or other monetization event of Barstool.”

ESPN’s foray into sports was the most anticipated shoe to drop in the fast-growing industry.

Market leaders FanDuel and DraftKings (DKNG) previously announced with ESPN to bring their odds and products to sports fans. DraftKings shares fell nearly 10% in after-hours trading Tuesday following the PENN-ESPN announcement.

In a press release, ESPN said ESPN BET will become the network’s exclusive sportsbook, PENN Entertainment will receive “odd odds, promotional services including digital product integration, traditional media and content integration, and access to ESPN talent, among other services that collectively generate maximum Increased fan awareness of ESPN BET”.

ESPN President Jimmy Pittaro said in a statement, “The strategy here is simple: give fans what they’ve been asking and expecting from ESPN. PENN Entertainment is the perfect partner to build an unparalleled sports betting user experience with ESPN BET.”

BOSTON, MA - SEPTEMBER 8: ESPN President Jimmy Pittaro prepares to warm up before catching a festive pitch prior to a game between the Boston Red Sox and New York Yankees on September 8, 2019 at Fenway Park in Boston, Massachusetts. (Photo by Billy Weiss/Boston Red Sox/Getty Images) — ESPN President Jimmy Pittaro warms up before catching a ceremonial first pitch before a game between the Boston Red Sox and New York Yankees on September 8, 2019 at Fenway Park in Boston, Massachusetts. (Photo by Billy Weiss/Boston Red Sox/Getty Images)

The deal also ended PENN’s troubled venture with Barstool Sports. The casino operator initially acquired a stake in the sports media company with the idea that Barstool’s content would provide in-house promotion for its online sportsbook.

But Mobile Sportsbook has lagged behind other major operators, and its relationship with Barstool and its controversial founder, Portnoy, has weighed on the stock.

After the sale is announced, Portnoy Post a video on X, Formerly known as Twitter, to share his thoughts on the deal.

“We had this deal about three years ago, and I think both parties were like, ‘We’re going to take this thing to the moon,'” Portnoy said. Business Insider multiplies the pieces with the stock price. Every time we did something it was one step forward and two steps back.

“I’ve been denied licenses because of me, you name it. So the regulated industry is probably (not) the best place for barstool sports and the kind of content we make.”