Penn National Gaming, Inc. (PENN: Nasdaq) announced late Wednesday evening that it has entered into four multi-year sports betting and iGaming market-access agreements, thus removing any lingering doubt regarding it’s plans to make the most of sports betting expansion in the U.S.

The Wyomissing-headquartered operator of casinos and racetracks has penned agreements with Toronto-based owner and operator of digital sports media products, theScore Inc. (TSX-V: SCR), American daily fantasy sports content provider, DraftKings, and Canadian gaming and online gambling company, The Stars Group (TSG) (TSGI.TO).

Senior Vice President of Interactive for Penn National Gaming, Jon Kaplowitz, commented in the official press release…

“We’re pleased to be providing the top names in sports betting, iGaming and poker access to our Company’s non-primary licenses to conduct these operations in exchange for a combination of upfront cash and equity, one-time market access fees and ongoing revenue sharing.”

Kambi makes four:

Additionally, B2B provider of sports betting services, Kambi Group plc (KAMBI:FN Stockholm) announced that it will power Penn National’s retail and online betting products going forward.  The Pennsylvania-based operator will, prior to an online and on-property launch, integrate the Kambi Sportsbook platform in jurisdictions with existing sports betting legislation.

Penn National operates upwards of 40 gaming facilities within 19 U.S. states, including eight with legal active sports betting industries, according to the official press release from Kambi.

Commenting on the recent tie-up, Chief Executive Officer for Kambi, Kristian Nylén, said…

“Kambi’s strategy has always been to partner with tier one operators, particularly those that share our vision and passion for sports and sports wagering. In Penn National, we have found an ideal partner – one that is not only passionate about providing high quality sports wagering experiences to its customers, but a company that adheres to the highest level of ethical business standards.

“It’s an honour for Kambi to be working with an organisation of the size and stature of Penn National, and we look forward to helping them become a national leader in the U.S. sports betting market in the coming years.”

Expected effect:

With an initial focus on the operator’s Iowa and Indiana land-based casinos, the first Penn sportsbooks roll-outs are slated to take place in Q3 of this year, with online sports betting to follow as early as 2020.

According to the news release, Kambi’s 2019 revenues are not expected to be impacted by the agreement, it does, however, have the potential to significantly effect its future revenues, depending on how fast relevant state regulations are put in motion. ‘The scale of the opportunity will result in additional short-term costs, particularly in relation to state licensing fees with an acceleration in licence applications required to capitalise on Penn National’s vast U.S. footprint.’

What Penn gets:

The Wednesday evening press release from Penn National illustrates each of the party’s take away from the deal, with all indications of the biggest impact in the short term leaning toward DraftKings Sportsbook.

  • DraftKings:
    • States covered: Florida (1), Indiana (3), Missouri (1), Ohio (1), Pennsylvania (1), Texas (1) and West Virginia (2)
    • Term of agreement: 10 years, optional 10-year extension
    • Cost: Revenue share   
  • PointsBet:
    • States covered: Indiana (2), Louisiana (1), Missouri (1), Ohio (1) and West Virginia (3)
    • Term of agreement: 20 years
    • Cost: Revenue share + 5.28% equity + $2.5 million conditionally for Ohio     
  • theScore:
    • States Covered: Indiana (2), Iowa (2), Kansas (3), Louisiana (1), Maine (3), Massachusetts (3), Michigan (3), Mississippi (1), Missouri (2), Ohio (2) and Texas (2)
    • Term of agreement: 20 years
    • Cost: Revenue share + 4.7% equity
  • The Stars Group:
    • States covered: Illinois (1), Indiana (1), Kansas (2), New Mexico (2), Maine (2), Massachusetts (2), Michigan (2), Ohio (1) and Texas (1)
    • Term of agreement: 20 years
    • Cost: Revenue share + $12.5 million + $5 million conditional for Texas

Conspicuous absence:

Absent from the comprehensive agreement is William Hill U.S., which in August last year held preliminary talks with Penn National for a market access and technology deal, according to London newspaper City A.M, as reported by SportsHandle.

The deal comes on the heels of another major announcement from Eldorado Resorts informing of its $8.58 billion-plus definitive merger agreement with Caesars Entertainment Corporation. Pending regulatory approvals, the merger would create the largest casino firm in the United States while also giving the Reno-headquartered operator a presence in five overseas jurisdictions encompassing Dubai, South Africa, Egypt, Canada and the United Kingdom.

In September last year, the British behemoth announced that it had become Eldorado’s exclusive partner in the provision of land-based and digital sports betting services as well as online gaming. Under the terms of the 25-year partnership deal, Eldorado received a 20% stake in William Hill US and extends the reach of the subsidiary and covers Eldorado’s 26 properties across 13 states, plus any new properties it may acquire or develop.

Wilmott retirement:

In related news, Penn National made another major announcement today, communicating that Chief Executive Officer Tim Wilmott (pictured, below) will retire from his position and from the board of directors at the year’s end. The company’s board of directors have appointed Jay Snowden, who has since 2014 served as chief operating officer and as president since 2017, as Wilmott’s successor. Penn also appointed the new CEO to its board, effective immediately.

Wilmott, who has been with the company as president and chief operating officer since 2008 and named chief executive officer in 2013, has served as a board of directors member since 2014.

Timing important:

Wilmott said…

“It was important to leave when we were well positioned to continue to grow our geographic footprint. We also have the ability to take advantage of sports betting. We have a strong management team and it was important to turn the keys over to someone I trust. Jay and I worked closely the last eight years.”

Also commenting was David Handler, Chairman of the Penn National Board of Directors, who said…

“On behalf of the Board, our shareholders and employee teams, we want to thank Tim for his significant contributions to Penn National’s transformation during his tenure, including his commitment to operational excellence and shareholder returns. Tim and Jay have partnered closely over the last eight years, laying a strong foundation for sustained long-term value creation at Penn National, making Jay ideally suited to serve as our next Chief Executive Officer.”