ESPN muscled aside the upstart Barstool Sports and struck a major sports-betting pact with operator Penn Entertainment that will put the Disney-owner sports giant into gaming and wagering in a major way.

Under terms of the deal, Penn will pay $1.5 billion in cash to ESPN over a ten-year term and grant ESPN approximately $500 million of warrants to purchase approximately 31.8 million Penn common shares that will vest ratably over 10 years, in exchange for media, marketing services, brand and other rights. Penn, which bought 36% of Barstool Sports in 2020 and recently completed its purchase of the company, is selling it back to its founder, Dave Portnoy, who will have to abide by certain non-compete agreements and give up to 50% to Penn in the event he sells or decides some other transaction for the property.

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“We are confident that the combination of our unparalleled audience along with Penn’s operational expertise and state-of-the-art technology provides us with a tremendous opportunity to serve the ever-growing number of consumers interested in betting,” said Jimmy Pitaro, the Disney executive who oversees ESPN.

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The pact allows Disney to take part in the growing national interest in legal wagering without taking bets directly on its own platforms. ESPN has been catering to gamblers with shows and even some ancillary game-casts devoted to odds-making. But executives have long been wary of being a direct facilitator of betting.

Disney CEO Bob Iger said last month that the company was interested in finding a strategic partner for its ESPN business, which is 20% controlled by Hearst. The betting deal does not represent that type of agreement, accord to a person familiar with the matter.

The deal launches a new chapter for Barstool Sports, a specialist in viral, sometimes edgy sports content. “The divestiture allows Barstool to return to its roots of providing unique and authentic content to its loyal audience without the restrictions associated with a publicly traded, licensed gaming company,” said Jay Snowden, Penn’s president and CEO.

Despite ESPN’s ubiquity among sports aficionados, there is no guarantee its popular brand will eke out new traction in the world of gambling. Legal wagering has been dominated by upstarts such as FanDuel and DraftKings. Fox Corp. recently exited a Fox Bet operation it had with Flutter Inc., the owner of FanDuel. Even so, Fox walked away with a stake in the parent and its operations.


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