(This story has been corrected in the second paragraph to show that Penn National Gaming’s stake in Barstool was made at a valuation, and not a price, of $450 million.)
Penn National Gaming is buying Score Media & Gaming for $2 billion, a price 111 times the past year’s sales of the Toronto-based business, seeking to add to its sports betting portfolio with Barstool Sports and gain access to the opening of the Ontario gambling market.
Penn, a casino owner that bought a 36% stake in Barstool Sports last year at a valuation of $450 million, is paying Score shareholders $17 cash plus 0.2398 a Penn share—equivalent to $15.88 at the time of the announcement.
“We are thrilled to be acquiring (Score), which is the number one sports app in Canada and the third most popular sports app in all of North America,” said Penn CEO Jay Snowden in a press release. “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.”
Penn said in its announcement it values Score for its in-house tech platform in player account management and its risk and trading platform. Score won’t immediately add much to Penn’s financials, having revenue of just $5.1 million in its most recent quarter and posting a net loss. In the past four quarters, Score generated $17.89 million in sales and a loss of $1.48 a share.
The deal is really about the expectations of the sports betting market continuing to open up. Ontario recently passed a law legalizing single-sports betting, to begin by the end of this year. The province will be the largest North American market, by population, for sports gambling and, given its significance in Canada, likely a harbinger of the rest of the country legalizing sports betting. Score probably has about 20% of Canadian sports fans as users, according to research by Credit Suisse.
Score listed its stock in the U.S. earlier this year and has been a flop, falling from its $27 IPO price to $18.14 with the close of trading Wednesday. Last month Score missed Wall Street estimates for sales and earnings by a wide margin and was the second-worst-performing sports stock, losing 22% of its value. Prior to the announcement, Score had a market cap of $988 million.
Penn National reported its second quarter results this morning as well, tallying $1.55 billion in revenue and $1.17 earnings per share, both modestly exceeding Wall Street expectations.