Transaction fortifies Penn National’s bespoke
digital media and gaming strategy, creating a complete one-stop
destination
Addition of theScore's fully integrated betting
and media platform into existing ecosystem will lead to
best-in-class engagement and retention
Brings theScore’s cutting-edge technology
in-house, providing Penn with full ownership of product roadmap
Establishes strong commitment to Canada; Levy
Family will continue to oversee theScore, including workforce
expansion and Ontario operations
Provides adjusted EBITDA accretion by Year 2,
an incremental $200mm+ medium term adjusted EBITDA, and $500mm+ of
incremental long term adjusted EBITDA upside
Penn National Gaming, Inc. (Nasdaq: PENN) (“Penn National” or
the “Company”) and Score Media and Gaming, Inc. (TSX: SCR; Nasdaq:
SCR) (“theScore”) announced today that they have entered into a
definitive agreement whereby Penn National will acquire theScore, a
leading digital media and sports betting and technology company,
for approximately US$2.0 billion in cash and stock.
Under the terms of the agreement, theScore shareholders will
receive US$17.00 in cash and 0.2398 shares of Penn National common
stock for each theScore share, which implies a total purchase
consideration of US$34.00 per theScore share based on Penn
National’s 5-day volume weighted average trading price as of July
30, 2021. 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$1 billion cash portion of the consideration using existing cash
on its balance sheet.
Jay Snowden, President and Chief Executive Officer 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.”
Mr. Snowden continued, “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.
“Importantly, the transaction provides us with a path to full
control of our own tech stack. 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,” said Mr. Snowden.
“Operators that have achieved early online market share have
done so primarily through first mover advantage, leveraging
existing customer databases and significant marketing spend. We
believe the long-term winners will be defined by best-in-class
products, bespoke content, efficient customer acquisition,
multi-platform reach and broad market access,” concluded Mr.
Snowden.
John Levy, Chairman and Chief Executive Officer 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 are
excited to join forces with Penn to form the most powerful media
and gaming company in North America.
“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,” continued Mr. Levy. “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 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,” concluded Mr. Levy.
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,
commented, “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,” continued
Mr. Levy. “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.”
Compelling Strategic and Financial Benefits:
Penn National anticipates that the acquisition of theScore will
provide adjusted EBITDA accretion by Year 2, an incremental $200mm+
medium term adjusted EBITDA, and $500mm+ of incremental long term
adjusted EBITDA upside.
Bringing Technology In-House:
The acquisition of theScore will allow Penn National to better
manage all critical aspects of its technology stack, leading to
greater control over its product development roadmap, reduced
costs, and an enhanced customer experience. It will also allow Penn
National to drive margin expansion by eliminating fees and expenses
currently being paid to third party technology and service
providers.
Strong Commitment to Canada:
Penn National believes the Canadian gaming market represents a
compelling opportunity for growth. Penn National intends to operate
theScore as a stand-alone business, headquartered in an expanded
Toronto office, that will continue to be led by the Levy family
with the same operating philosophy that has driven the company’s
success to date. The business will continue to utilize ‘theScore’
app and brand that consumers have come to trust.
Penn National was attracted to theScore, in part, for its ready
access to a deep pool of Canadian engineering and technology
expertise. Penn National expects to leverage Canada’s world class
technology talent pool to expand theScore’s engineering and
production workforce based in Ontario as the business scales.
Volumetric Cost Savings:
The transaction will create a further scaled North American
sports, online gaming and media business. This broader reach will
provide volumetric savings for content fees, payment expenses, and
other services, including the elimination of public company
costs.
Enhanced Customer Acquisition and Retention:
theScore is the third largest sports app in North America and
number one in Canada, with highly engaged users spending 113
minutes per month in-app*. Early results show the power of
theScore’s integrated media and betting ecosystem to better engage
and retain users; theScore Bet users with theScore media app
compared to theScore Bet users who do not have theScore media app
produce 88% higher handle/user, place 3x the number of bets/user,
and generate a 91% increase in day 30 retention**. This increased
cross-promotion ecosystem between theScore and Barstool is expected
to lead to higher revenue.
Expansion Into New Verticals:
This acquisition underscores Penn National’s focused,
disciplined investment strategy which positions us at the epicenter
of sports, media, gaming and technology and provides us with
multiple channels for future growth. In addition, this transaction
accelerates Penn National’s strategy to enter into other
adjacencies that leverage the Barstool and theScore brands and
consumer appeal, such as the highly coveted esports media
vertical.
Financing:
Penn National will fund the acquisition through a mix of cash on
hand and common stock. We expect the transaction, at the time of
close, to be leverage neutral to our lease-adjusted net leverage of
4.0x as of June 30, 2021.
theScore Shareholder Support
Penn National has entered into voting support agreement with the
directors of theScore, John Levy and Benjamin Levy, and Relay
Ventures, a significant shareholder of theScore, under which they
have agreed, subject to certain termination rights, to vote all of
the theScore shares held by them in favor of the transaction, which
represents in total approximately 30 percent of the existing voting
shares of theScore.
Advisors
Goldman, Sachs & Co. LLC and Code Advisors LLC are acting as
financial advisors and Wachtell, Lipton, Rosen & Katz and
Blake, Cassels & Graydon LLP are acting as legal advisors to
Penn National in connection with the transaction. Morgan Stanley
& Co. LLC and Canaccord Genuity Group are acting as financial
advisors and Paul, Weiss, Rifkind, Wharton & Garrison LLP and
McCarthy Tétrault LLP are acting as legal advisors to theScore in
connection with the transaction. Greenhill & Co. Canada, Ltd.
is acting as independent financial advisor to theScore’s board of
directors.
Osler, Hoskin & Harcourt LLP is acting as legal advisor to
the Levy Family in connection with this transaction.
Additional Transaction Details
theScore’s board of directors unanimously concluded that the
transaction is in the best interests of theScore and recommend that
theScore shareholders vote in favor of the transaction.
Greenhill & Co. Canada, Ltd. (“Greenhill”), independent
financial advisor to theScore’s board of directors, has delivered a
fairness opinion to theScore’s board of directors stating that, as
of the date thereof and, based upon and subject to the assumptions,
qualifications, and limitations stated in such opinion and such
other matters Greenhill considered relevant, the consideration to
be received by shareholders of theScore pursuant to the transaction
is fair, from a financial point of view, to shareholders of
theScore (other than the Levy family shareholders signing voting
support agreements, Penn National and its affiliates). Pursuant to
its engagement letter with theScore’s board of directors, Greenhill
will receive a fixed fee for the delivery of the fairness opinion.
No fees payable to Greenhill are contingent on the conclusions
reached in the fairness opinion or on the outcome of the
arrangement.
The transaction is structured as an arrangement under the
Business Corporations Act (British Columbia) and is subject to
customary closing conditions, including approval of the
shareholders of theScore, the approval of applicable gaming
authorities, the expiration or termination of the applicable
waiting period under the Hart-Scott-Rodino Act, approval under the
Investment Canada Act and other customary closing conditions as set
forth in the arrangement agreement. The transaction is not subject
to any financing condition. theScore is subject to customary
non-solicitation provisions under the arrangement agreement. The
agreement also includes a termination fee payable in certain
circumstances.
Eligible Canadian shareholders of theScore will be able to elect
to receive exchangeable shares in a Canadian subsidiary of Penn
National, which will be exchangeable into Penn National shares,
instead of the Penn National shares to which they would otherwise
be entitled.
Shareholder Meeting Materials
Further information regarding the transaction will be included
in an information circular to be mailed to theScore shareholders. A
meeting of theScore shareholders is expected to be scheduled in
mid-October to consider the transaction.
PENN Second Quarter 2021 Earnings Results
In a separate press release issued today, Penn National
announced its Second Quarter 2021 financial results. To access the
earnings release, please visit here.
Conference Call and Webcast
Penn National and theScore will host a conference call and
simultaneous webcast today, August 5, 2021 at 9:00 a.m. ET to
review the transaction and host a question and answer session. The
conference call number is 212/231-2907; please call five minutes in
advance to ensure that you are connected prior to the presentation.
Interested parties may also access the live call on the Internet at
www.pngaming.com or theScore’s website at
http://scoremediaandgaming.com; allow 15 minutes to register and
download and install any necessary software. Questions and answers
will be reserved for call-in analysts and investors. A replay of
the call can be accessed for thirty days on the Internet at
www.pngaming.com or theScore’s website at
http://scoremediaandgaming.com. During the conference call and
webcast, management will review a presentation summarizing the
proposed transaction which can be accessed at www.pngaming.com.
About Penn National
With the nation's largest and most diversified regional gaming
footprint, including 43 properties across 20 states, Penn National
continues to evolve into a highly innovative omni-channel provider
of retail and online gaming, live racing and sports betting
entertainment. The Company's properties feature approximately
50,000 gaming machines, 1,300 table games and 8,800 hotel rooms,
and operate under various well-known brands, including Hollywood,
Ameristar, and L'Auberge. Our wholly-owned interactive division,
Penn Interactive Ventures, LLC, operates retail sports betting
across the Company's portfolio, as well as online social casino,
bingo, and iCasino products. In February 2020, Penn National
entered into a strategic partnership with Barstool Sports, Inc.
(“Barstool”) whereby Barstool will exclusively promote the
Company's land-based and online casinos and sports betting
products, including the Barstool Sportsbook mobile app, to its
national audience. The Company's omni-channel approach is bolstered
by the mychoice loyalty program, which rewards and
recognizes its over 24 million members for their loyalty to both
retail and online gaming and sports betting products with the most
dynamic set of offerings, experiences, and service levels in the
industry.
About theScore
theScore empowers millions of sports fans through its digital
media and sports betting products. Its media app ‘theScore’ is one
of the most popular in North America, delivering fans highly
personalized live scores, news, stats, and betting information from
their favorite teams, leagues, and players. The Company’s sports
betting app ‘theScore Bet’ delivers an immersive and holistic
mobile sports betting experience and is currently available to
place wagers in New Jersey, Colorado, Indiana and Iowa. theScore
also creates and distributes innovative digital content through its
web, social and esports platforms.
Forward Looking Statements
This press release contains “forward-looking statements” within
the meaning of the Private Securities Litigation Reform Act of 1995
and applicable Canadian securities laws.
These statements can be identified by the use of forward-looking
terminology such as “expects,” “believes,” “estimates,” “projects,”
“intends,” “plans,” “goal,” “seeks,” “may,” “will,” “should,” or
“anticipates” or the negative or other variations of these or
similar words, or by discussions of future events, strategies or
risks and uncertainties. Specifically, forward-looking statements
include, but are not limited to, statements regarding the Company’s
acquisition of theScore, the Company’s digital strategy, the
potential benefits of the acquisition of theScore, including
benefits for the Company’s digital betting and content platform
through the integration of Barstool Sports and theScore, the
anticipated financial returns from the acquisition of theScore,
including reductions in customer acquisition and third party costs,
and growth in sales in North America and the projected closing date
of the acquisition of theScore. Such statements are all subject to
risks, uncertainties and changes in circumstances that could
significantly affect the Company’s future financial results and
business. Accordingly, the Company and theScore cautions that the
forward-looking statements contained herein are qualified by
important factors that could cause actual results to differ
materially from those reflected by such statements. Such factors
include, but are not limited to: (a) the magnitude and duration of
the impact of the COVID-19 pandemic on general economic conditions,
capital markets, unemployment, consumer spending and the Company’s
liquidity, financial condition, supply chain, operations and
personnel; (b) the Company may not be able to achieve the
anticipated financial returns from the acquisition of theScore due
to fees, costs and taxes in connection with the integration of
Barstool Sports and theScore; (c) the closing of the acquisition of
theScore may be delayed or may not occur at all, for reasons beyond
our control; (d) the requirement to satisfy the closing conditions
in the agreement with theScore, including receipt of regulatory
approvals and the approval of shareholders of theScore; (e)
potential adverse reactions or changes to business or regulatory
relationships resulting from the announcement or completion of the
acquisition; (f) the ability of the Company or theScore to retain
and hire key personnel; (g) the occurrence of any event, change or
other circumstances that could give rise to the right of one or
both of the Company and theScore to terminate the agreement between
the companies; (h) other factors as discussed in the Company’s
Annual Report on Form 10-K for the year ended December 31, 2020,
subsequent Quarterly Reports on Form 10-Q and Current Reports on
Form 8-K, each as filed with the U.S. Securities and Exchange
Commission; and (i) other factors as discussed in theScore’s Annual
Information Form as filed with applicable securities regulatory
authorities in Canada and as filed with the U.S. Securities and
Exchange Commission, and elsewhere in documents that theScore files
from time to time with such securities regulatory authorities in
Canada and with the U.S. Securities and Exchange Commission,
including its Management’s Discussion & Analysis and Management
Information Circular. Neither the Company nor theScore intends to
update publicly any forward-looking statements except as required
by law. In light of these risks, uncertainties and assumptions, the
forward-looking events discussed in this press release may not
occur.
Non-GAAP Financial Measures
This press release uses Adjusted EBITDA, which is a non-GAAP
financial measure. This non-GAAP financial measure should not be
considered a substitute for, nor superior to, financial results and
measures determined or calculated in accordance with GAAP.
We define Adjusted EBITDA as earnings before interest expense,
net; income taxes; depreciation and amortization; stock-based
compensation; debt extinguishment and financing charges; impairment
losses; insurance recoveries, net of deductible charges; changes in
the estimated fair value of our contingent purchase price
obligations; gain or loss on disposal of assets; the difference
between budget and actual expense for cash-settled stock-based
awards; pre-opening and acquisition costs; and other income or
expenses. Adjusted EBITDA is inclusive of income or loss from
unconsolidated affiliates, with our share of non-operating items
(such as interest expense, net; income taxes; depreciation and
amortization; and stock-based compensation expense) added back for
Barstool Sports, Inc. and our Kansas Entertainment, LLC joint
venture. Adjusted EBITDA is inclusive of rent expense associated
with our triple net operating leases (the operating lease
components contained within our triple net master lease dated
November 1, 2013 with Gaming and Leisure Properties, Inc. (“GLPI”)
and the triple net master lease assumed in connection with our
acquisition of Pinnacle Entertainment, Inc. (primarily land), our
individual triple net leases with GLPI for the real estate assets
used in the operations of Tropicana Las Vegas and Meadows Racetrack
and Casino, and our individual triple net leases with VICI
Properties Inc. for the real estate assets used in the operations
of Margaritaville Casino Resort and Greektown Casino-Hotel).
Although Adjusted EBITDA includes rent expense associated with our
triple net operating leases, we believe Adjusted EBITDA is useful
as a supplemental measure in evaluating the performance of our
consolidated results of operations.
Adjusted EBITDA has economic substance because it is used by
management as a performance measure to analyze the performance of
our business, and is especially relevant in evaluating large,
long-lived casino-hotel projects because it provides a perspective
on the current effects of operating decisions separated from the
substantial non-operational depreciation charges and financing
costs of such projects. We present Adjusted EBITDA because it is
used by some investors and creditors as an indicator of the
strength and performance of ongoing business operations, including
our ability to service debt, and to fund capital expenditures,
acquisitions and operations. These calculations are commonly used
as a basis for investors, analysts and credit rating agencies to
evaluate and compare operating performance and value companies
within our industry. In order to view the operations of their
casinos on a more stand-alone basis, gaming companies, including
us, have historically excluded from their Adjusted EBITDA
calculations of certain corporate expenses that do not relate to
the management of specific casino properties. However, Adjusted
EBITDA is not a measure of performance or liquidity calculated in
accordance with GAAP. Adjusted EBITDA information is presented as a
supplemental disclosure, as management believes that it is a
commonly used measure of performance in the gaming industry and
that it is considered by many to be a key indicator of the
Company’s operating results.
Adjusted EBITDA is not calculated in the same manner by all
companies and, accordingly, may not be an appropriate measure of
comparing performance among different companies. The Company does
not provide reconciliations of Adjusted EBITDA to net income (loss)
on a forward-looking basis because the Company is unable to
forecast the amount or significance of certain items required to
develop meaningful comparable GAAP financial measures without
unreasonable efforts. These items include gains or losses on sale
or consolidation transactions, accelerated depreciation, impairment
charges, gains or losses on retirement of debt, income taxes, which
are difficult to predict and estimate and are primarily dependent
on future events, but which are excluded from the Company’s
calculations of Adjusted EBITDA.
*May 2021 LTM. Source: Comscore Mobile Metrix ** Source:
theScore’s internal data and platform reports.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20210805005389/en/
Penn National Investor Relations: Justin Sebastiano SVP,
Finance & Treasurer Justin.Sebastiano@pngaming.com 610-401-2029
General Media Inquiries: Eric Schippers SVP, Public Affairs &
Government Relations Eric.Schippers@pngaming.com 610-378-8321
theScore Investor Relations: Alvin Lobo Chief Financial
Officer ir@thescore.com 416-479-8812 Richard Land, James Leahy JCIR
scr@jcir.com 212-835-8500 General Media Inquiries: Daniel Sabreen
Director, Communications dan.sabreen@thescore.com 917-722-3888 ext.
706
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