Shares of theScore close up 79% after Penn National announces plans to buy the company for $2 billion

Shares of Score Media and Gaming, which operates theScore, closed up 79.9% Thursday after Penn National announced it’s acquiring the company for $2 billion in cash and stock options. Shares of Penn National closed up 9%.

The deal increases Penn National’s reach in North America, since Score Media and Gaming has positioned itself to leverage the Canadian mobile sports betting marketplace.

Penn National said Score Media and Gaming shareholders will receive $17 in cash and 0.2398 shares of its common stock for each theScore share, bringing the total share price to $34.00.  Penn National estimates the acquisition will provide adjusted EBITDA growth in two years, an incremental $200 million medium-term adjusted EBITDA, and $500 million of incremental long-term adjusted EBITDA upside.

Goldman Sachs and Morgan Stanley served as advisors in the transaction.

Penn National also backs the Barstool Sports app, which it purchased in 2020 for $450 million. In a statement, Penn National CEO Jay Snowden said theScore acquisition allows the company to obtain the company’s in-house technology. That that “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,” he added.

TheScore transitioned into its role as a digital-based outlet in 2012 when it sold its broadcast business to Rogers Communications for $167 million. It built a sports gaming and media division and attempted to leverage its mobile app user base into a competitive sports betting business. The company launched theScore Bet app for mobile wagers in 2019, and this year made its debut on the Nasdaq.

While discussing theScore’s future last March, Chris Lencheski, the chairman of private equity consulting company Phoenicia Lencheski, warned the dollar average to acquire a new customer would begin to weigh on firms with little capital and would drive acquisitions and mergers over the next 24- to 48 months.

Score Media and Gaming estimates its home market can grow to $5.4 billion, and the Ontario market alone could reach $2.1 billion by 2025. According to Bloomberg, Canadians place over $7 billion in illegal wagers since sporting gambling in the country is mainly limited to horse racing.

Penn National released its 2021 second-quarter earnings report on Thursday morning, noting $1.5 billion in revenue for the quarter.