NEW YORK (Reuters) - Penn National Gaming Inc announced a $163 million investment in sports media company Barstool Sports on Wednesday, seeking to capitalize on the growing popularity of sports betting and its legalization by more U.S. states.
The U.S. Supreme Court lifted a federal ban on sports betting in May 2018, allowing more states to legalize it. Last September, Barstool launched Barstool Bets, a website with free games and online personalities, to attract people to bet on live matchups through their smart phones.
The cash-and-stock deal values Barstool at $450 million. Under its terms, Penn will increase the 36% stake it obtains in Barstool to 50% in three years, through an additional investment of about $62 million. After that point, Penn will have the option to buy out the remainder of Barstool.
As part of the agreement, Penn will be Barstool’s exclusive gaming partner for up to 40 years, and have the sole right to use the Barstool brand in its online and retail sports betting and iCasino products.
“Many media companies are not very sticky with their viewers, but Barstool has managed to build a loyal following, with content, brands and events,” said Penn National CEO Jay Snowden.
Founded by Dave Portnoy in 2003 as a newspaper, Barstool now touts 66 million monthly unique visitors on its site, most of them between 21 and 44 years old.
The Chernin Group, a company of former News Corp president Peter Chernin, will reduce its ownership of Barstool from 60% to 36%. The remaining 28% will be held by Barstool employees.
Penn operates casinos and resorts that have 50,500 gaming machines, 1,300 table games and 8,800 hotel rooms. It shares jumped 13% to $29.60 following the deal announcement, giving it a market capitalization of $3.4 billion.
Moelis & Company advised Barstool on the deal.
(This story corrects final paragraph to show Moelis advised Barstool, not Penn National)
Reporting by Krystal Hu in New York; Editing by David Gregorio