Penn National Gaming acquires theScore for $2bn in cash and stock

Image source: Shutterstock

Penn National Gaming Inc and Score Media and Gaming Inc have entered into a definitive agreement whereby Penn National will acquire digital media and sports betting company theScore for approximately US$2bn in cash and stock.

Under the terms of the agreement, theScore shareholders will receive US$17 in cash and 0.2398 shares of Penn National common stock for each theScore share, which implies a total purchase consideration of US$34 per share.  

The transaction has been unanimously approved by the boards of directors of both companies and is currently expected to close in the first quarter of 2022. Upon completion of the transaction, current Penn National and theScore shareholders will hold approximately 93% and 7% respectively, of the company’s outstanding shares. 

Penn National expects to fund the approximately US$1bn cash portion of the consideration using existing cash on its balance sheet.

Jay Snowden, President and CEO of Penn National, commented: “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. 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.”  

He added: “We are now uniquely positioned to seamlessly serve our customers with the most powerful ecosystem of sports, gaming and media in North America, ultimately creating a community that doesn’t currently exist.  

“Users will enjoy a unique mobile sports betting and icasino platform with highly customized bets and enhanced in-gaming wagering opportunities, along with highly engaging, personalized sports and entertainment content, and real time scores and stats. We believe this powerful new flywheel will result in best-in-class engagement and retention.

Snowden believes that the transaction provides Penn with a path to full control of its own tech stack. He explained: “theScore has developed a state-of-the-art player account management system and is finalizing the development of an in-house managed risk and trading service platform.  

“This should lead to significant savings in third party platform costs and allow us to broaden our product offerings – providing the missing piece for operating at what we expect to be industry leading margins. 

“In addition to the synergies, we’ll be gaining access to theScore’s deep pool of product and engineering talent and data-driven user analytics which will help drive our customer acquisition, engagement, retention strategies and cash flows,” 

John Levy, Chairman and CEO of theScore, commented: “This deal brings together two companies that share a vision for how media and gaming intersect, and we could not be more excited to join the Penn National family. I’m proud of theScore team and all of our accomplishments, and believe the time is right to take the next step and align with a company in Penn National with the resources and scale to accelerate our business. 

“We’ve built an innovative, technology-led integrated media and gaming business that has us poised for success across North America, including the highly anticipated upcoming rollout of commercial sports betting in Canada. 

“With Penn’s support, we will continue to invest in building our Canadian operations, growing our footprint and expanding our workforce. On a personal note, Benjie (Levy) and I are very much looking forward to continuing to head up theScore as part of the new combined company.

“We have been strategic partners with Penn National since 2019 and have come to realize that they have the same strong culture and appreciation for how to grow a business. Jay and his team have done a tremendous job building an exceptional retail business and online gaming platform in partnership with Barstool Sports and we are confident that by combining our leading sports media brand and proprietary technology, we will solidify Penn National as a market leader.”

Jon Kaplowitz, Head of Penn Interactive, commented: “This is a significant milestone for Penn Interactive and Penn National. With the acquisition of theScore, we will have greater ability to innovate and offer a best-in-class product to our customers. Personally, I am excited to join forces with John, Benjie, and the rest of theScore team who have proven to be great partners and amazing thought leaders in our industry.”

Benjie Levy, President and Chief Operating Officer of theScore, stated: “The combination of theScore and Penn National creates a first-of-its-kind vertically integrated media and omni-channel gaming business, which brings together world-class technology, highly engaging sports content and unparalleled reach. 

“With our accomplished team in place, this deal bolsters our ability to grow our already strong North American presence from our base in Canada and primes us even further to capitalize on the huge upcoming betting opportunity in our home country. Over time, we’ve built our loyal user base and relationship with fans by authentically delivering deeply personalized products. 

“That is an approach that seamlessly fits with Penn’s current strategy and digital offerings and will provide for material long-term benefits as we collaborate to even more deeply integrate across our platforms.

“The transaction will provide theScore with immediate scale and resources, the benefits of which will enable employees to better execute on the combined companies’ business plan and deliver enhanced integrated product offerings to our customers. The transaction also provides theScore shareholders immediate liquidity at a substantial premium and an opportunity to participate in any future upside of the combined company.”

Penn National anticipates that the acquisition of theScore will provide adjusted EBITDA accretion by Year 2, an incremental $200m+ medium term adjusted EBITDA, and $500m+ of incremental long term adjusted EBITDA upside.

Today’s news also prompted a response from Kambi Group, which signed a long-term partnership with Penn National Gaming in 2019, to the effect that it will have no financial impact on the group for the guaranteed term of the contract.

CEO and Co-founder Kristian Nylén commented: “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 transaction 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.”