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O, Canada: Penn will acquire one of Canadas biggest sports betting platforms theScore in a $2 ... [+] billion deal.

Penn National Gaming will acquire Toronto-based Score Media and Gaming, which runs sports betting platform theScore, for $2 billion.

Penn National, which announced the deal on Thursday, will pay Score Media shareholders $34 per share in a mix of stock and cash. Score Media shareholders will receive $17 in cash per share and 0.2398 shares of Penn National common stock for each Score share. Once the transaction is complete, Penn National will own approximately 93% of Score Media and Gamings outstanding shares while Score shareholders will keep 7%.

Jay Snowden, president and chief executive of Penn National, says theScore will complement the companys investments in sports betting. In January 2020, Penn bought a 36% stake in sports media publisher Barstool Sports for $163 million and it has since spun out a Barstool Sportsbook betting app in Pennsylvania, Michigan and Illinois. Through the acquisition of theScore, Penn will get the companys 4 million daily active users, one third of which are in Canada, where sports betting is limited to parlay bets, and two thirds of theScores users are in the U.S. across Colorado, Indiana, Iowa and New Jersey.

Score Media, unlike Penn, has developed all of its gaming platform technology in-house. Snowden said that in-house technology is the missing piece for Penn to be operating at what he describes as industry-leading margins because it will be able to terminate its contracts with third party technology platforms.

Importantly, the transaction provides us with a path to full control of our own tech stack, says Snowden. 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.

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.

Penns stock is up over 9% today and Score Media and Gamings stock price is up a whopping 80%.

Penn National said it will fund half of the transaction$1 billionthrough cash on its balance sheet.

Score Media was started by its chief executive, John Levy, in 2012 after he sold his cable TV channel for $131 million to Rogers Communications. Levys son, Benjie, is the companys COO. The older Levy, according to public filings, owns approximately 18% of the companys shares, which are worth more than $300 million, according to terms of the transaction with Penn. The Levy family will continue to operate theScore.

Chad Beynon, an analyst at Macquarie Capital, says its a good deal for Penn.

I think what Penn is buying is a pretty solid front-row ticket to be a major player in Canada, says Beynon.

Beynon adds that Penn is also getting a sizable user base in the U.S., although theScore only has about 1% of the market in each of the four states in which it is currently operating.

But in mobile gambling, customer acquisition is key. It costs roughly $500 to acquire one customer and if a platform can retain them for six months, itll start turning a profit on each user.

You do that mathPenn essentially paid market rates for these customers, and on top of that, they got the technology synergies and a Canadian beachhead, Beynon says.

Excerpt from:
Penn National To Acquire Score Media And Gaming For $2 Billion - Forbes