Online sports-betting company Penn Entertainment Inc. sealed a $1.5 billion deal with Walt Disney Co.’s DIS, +1.50% ESPN to launch ESPN Bet, a branded sportsbook for fans in the U.S., and pivoted away from Barstool Sports on Tuesday, selling the platform back to founder Dave Portnoy.
Penn Entertainment PENN, -0.68% will rebrand its current sportsbook and relaunch as ESPN Bet in the fall in 16 legalized betting states where Penn Entertainment is licensed.
The rebrand — which includes the mobile app, website, and mobile website — sent Penn’s stock soaring 23% in after-hours trading Tuesday. ESPN Bet will benefit from exclusive promotional services across ESPN’s platforms, including access to ESPN talent, the companies said.
Penn will pay ESPN $1.5 billion over 10 years as part of the strategic partnership, and will grant ESPN $500 million of warrants to purchase about 31.8 million Penn common shares, with additional bonus warrants possible.
“Together, we can utilize each other’s strengths to create the type of experience that existing and new bettors will expect from both companies, and we can’t wait to get started,” Penn Entertainment Chief Executive Jay Snowden said in a release.
Penn also said it has divested 100% of its stake in Barstool Sports to Portnoy, allowing the sports media platform “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.”
The news sent rival DraftKings Inc. shares DKNG, +0.25% sinking more than 8% in after-hours trading.
The decline in DraftKings shares comes as they’ve advanced 178% so far in 2023, through Tuesday’s close. Two analysts upgraded DraftKings’ stock just this week.
Disney shares rose fractionally in after-hours trading.
Mike Murphy contributed to this report.