Fanatics spreads its wings in two directions

Tom Paine

Michael Rubin’s Fanatics Inc. last week announced new funding that raised its valuation to $18 billion. The Jacksonville-based company, a part of Rubin’s Conshohocken-based Kynetic LLC holding company, is widely viewed as a soon-to-be IPO candidate.

Now Fanatics is attempting to branch in two new directions that do not involve apparel sales, potentially adding to its growth and increasing margins.

First, it won a license from the MLB Players Association, first reported today, replacing Topps (and Panini’s) as the exclusive baseball card partner of the MLBPA after Panini’s and Topps’ licenses with the MLBPA expire at the end of 2022.

The deal also includes the National Basketball Players Association and the NFL Players Association.

Meanwhile, Shawn “Jay-Z” Carter and Rubin are a part of a group applying for an online sports betting license in New York, and plan to form Fanatics Sportsbook.

Sports betting tech company Kambi is leading that bid that also includes Berks County-based gaming giant Penn National, which owns Barstool Sportsbook.

The New York State Gaming Association is aiming to award the new licenses by December 6, so betting can start on the Super Bowl.

In both initiatives, Fanatics stressed the opportunity to leverage its unique fan databases on the new businesses.

Philly EnterpriseTech Notable Quotes 8/7/2021

“We were failing to attract data center developers to Pennsylvania because our tax policy was driving development to other states,” said state Sen. John Yudichak, a co-sponsor of the legislation. “The implementation of new tax policies that leverage private investment and encourage private sector job growth demonstrates Pennsylvania is stepping up its economic game and competing for high-wage technology jobs.”

“When I was at Comcast, I remember meeting with a [white] woman and being really intrigued with her business,” Crowder said. “But I had to tell her ‘I love what you are doing but I can’t invest because this is a diversity fund.’ It was the most ridiculous thing for a Black man to have to say that because of your race, we cannot invest.”

William Crowder, a lead investor for Comcast Ventures’ Catalyst Fund for five years, on setting out on his own [co-founded] $75 million fund.

When asked whether the renovations were in any way intended as a carrot for the Sixers, Camillo said: “We’re not thinking about our transformation in terms of enticing the Sixers to stay. We’re thinking about it in terms of every guest who comes into the building, and the Sixers are certainly part of that. But we also host Flyers games, concerts, family events, shows. This is an investment in the city, in the community, in the stadium district. We want to provide the city of Philadelphia a world-class arena.

Total [Paypal] payment volume grew 40% to $311 billion, while the Venmo app, which began supporting cryptocurrency services in April, saw payment volume grow 58% to $58 billion.

Some industry observers warn that Big Tech’s extended geographic reach could stifle innovation. Bhaskar Chakravorti, dean of global business at the Fletcher School at Tufts University said sectors like artificial intelligence are already heavily concentrated among a small number of companies.

“If you imagine Google and Facebook and Apple and Amazon and Microsoft, they start hiring AI talent from Philadelphia, Houston and so on and so forth, those tiny startups, which also are a critical part of the AI ecosystem, they are not going to be able to get that talent,” he said.

A critical component to making the shorter week work is that employees need to relearn how to work in a more focused way, said Justine Jordan, head of marketing at a Philadelphia software company that first allowed employees to work 32-hour weeks starting in 2017. That means fewer meetings and avoiding day-to day distractions, she said. Most at the 30-person firm, Wildbit, take Friday off; some take Monday; and a smaller group, mostly parents, spread their time off across five days, she said.

“Amazon Web Services, grew its revenue 37% in the second quarter, faster than 32% growth in the previous quarter. AWS revenue came in at $14.81 billion in the quarter, surpassing analysts’ estimated $14.20 billion.”

“German-speaking users’ experiences with old on-premise SAP systems have been really good,” he said. “They got a lot of things done. They have good processes, but they also experienced some problems with integrating with cloud technology, and I think that’s one of the reasons why our membership is a little bit cautious about RISE with SAP, right now, because they just want to see if that’s really going to work. The experiences they’ve had were not so good all time. It’s up to SAP to prove they are a cloud company and can deliver on their promises.

[KOP-based] CMI and Compas both have seen double-digit growth year over year for the past several years and added lots of staff to serve their pharma and health clients. CMI added 215 people last year and already added another 154 in the first half of 2021, while Compas added 26 last year and another 21 so far this year.

“Strategically we think this deal makes a lot of sense, driving deeper integration and in-house capabilities, but we suspect the market will  have a different opinion on the [nearly 87%] premium being paid,” analysts at KeyBanc Capital Markets said.

Analysts commenting on Penn National’s announced $2 billion acquisition of Canadian tech gaming firm Score Media.

Penn National Gaming in $2 billion Canadian acquisition

Berks County-based Penn National Gaming, Inc. (Nasdaq: PENN) has reached an agreement to acquire Toronto-based Score Media and Gaming, Inc. (TSX: SCR; Nasdaq: SCR) for $2 billion, it was announced this morning

Penn National’s press release emphazises the value of Score Media’s technology. “Brings theScore’s cutting-edge technology in-house, providing Penn with full ownership of product roadmap“, it reads in part.

Penn National Gaming to Acquire Score Media and Gaming, Creating North America’s Leading Digital Sports Content, Gaming and Technology Company

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 upsideAugust 05, 2021 07:01 AM Eastern Daylight Time

WYOMISSING, Penn. & TORONTO–(BUSINESS WIRE)–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.

“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.”Tweet this

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.


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.


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.

Barstool Sports & Penn National; a marriage made in heaven?

Investment management firm Roundhill Investments wrote a colorful post back in September on how Penn National Gaming’s investment in Barstool Sports has worked out (great for both parties to date). Its entitled “PENN’S ACQUISITION OF BARSTOOL SPORTS – ONE OF THE ALL-TIME GREATS?”

On January 29th 2020, Berks County-based Penn National Gaming (Nasdaq: Penn) announced that it was investing $163 million in Barstool Sports for a 36% equity stake, valuing Barstool at $450 million. The $163 million consisted of $135 million in cash and $28 million in stock, and included warrants that would entitle Penn to majority control if exercised (after year 3)

The US online betting market is less developed than other comparable world markets, so the assumption is that there is plenty of room for growth. Penn’s investment in Barstool is an investment in the future; 65% of Barstool’s audience, which as of January included 66 million unique visitors a month, is aged 21 to 44, people who would grow into becoming larger wagerers. Penn National’s customer base has a strong affinity towards the Barstool brand, more than for other sports media bands, Roundhill asserts.

The branding angle is key. Penn National is certainly well known in the gaming industry, but not to the pubilc. So the Barstool name gives Penn National a stronger image in the minds of consumers.

But Barstool f0under Dave Portnoy may have reason to complain. When the. investment was announced on January 29 of this year, Penn National stock was at $29.02. As the impact of Covid-19 became clearer, Penn National had liquidity concerns and its shares cratered at $4.52 on March 18 (post- St. Pats hangover?). But for the remainder of the year they caught fire before closing Friday (Dec. 18) at $91.94. More than triple the price when the deal took place, and 20x the price from when it hit is nadir.

So Portnoy would have done much better by taking all Barstool’s stake in Penn stock, if that was an option. Barstool would have been worth almost $300 million more today, although it would have been a wild ride in between.

Penn National Gaming’s Trials and Tribulations

Tom Paine

David Williams probably never expected what would follow when he signed on with Penn National Gaming (Nasdaq: PENN) as CFO in January, to begin work March 3. The 20 year Apple employee, last as CFO of its Claris (formerly FileMaker) subsidiary, was probably looking forward to potentially booming times at the Berks County-based company, and the biggest problem managing growth. The gaming industry has been jumping with opportunities.

Then Covid-19 hit the US and eventually led to shutdowns of most social gatherings spots, including on-premise gaming operations.

Suddenly Penn National was facing a liquidity crisis. Earlier in March it drew down the remainder its $700 million revolving credit facility. The company has temporarily closed 34 properties across the country. It also announced that it has suspended the construction of $110 million Hollywood Casino Morgantown and the $120 million Hollywood Casino York in Pennsylvania .

And it reached an agreement Friday to sell the real estate assets of the Tropicana Las Vegas for $337.5 million in rent credits, while maintaining operating rights. “While this transaction will help to relieve liquidity pressure in terms of rent obligations, we are committed to taking further steps to reduce our ongoing operating expenses in order to ensure we have a healthy business to return to when we are able to re-open our doors,”  said Penn National President & CEO Jay Snowden in a statement.

On Friday Penn National also announced unpaid furloughs for approximately 26,000 employees companywide beginning April 1. 

Busy month for Mr. Williams. And Apple isn’t needy for cash.