ESPN and Penn Entertainment are teaming up to form a sports-betting company called ESPN Bet, a rebranding of Barstool Sportsbook, the companies announced Tuesday.

As part of the deal, ESPN reported that Penn “agreed to pay ESPN $1.5 billion in cash over 10 years, as well as grant ESPN $500 million of warrants to purchase approximately 31.8 million common shares of Penn.”

The 10-year agreement could become 20 if a “mutual agreement” were to be reached.

“Our agreement to create ESPN Bet with Penn Entertainment is a natural extension of what ESPN is currently doing in the sports betting space,” an ESPN spokesperson told The Street.

“We’re excited to bring sports fans a more streamlined experience by linking out to ESPN Bet, powered by Penn Entertainment, from various digital properties. We will work closely with Penn to grow this evolving business by taking advantage of the incredible reach, value and trust that the ESPN brand offers.”

Penn will rebrand Barstool to ESPN Bet in the 16 states where it is licensed.

Penn purchased 36 percent of Barstool Sports in 2020 and now will sell it back to Barstool founder Dave Portnoy, with a few non-compete strings attached; he would give Penn up to 50 percent of any transaction involving the property.

According to ESPN, this new product will “include a mobile app, website, mobile website and mutually agreed upon retail locations.”

Sports betting fans will soon be able to use ESPN’s digital offerings to place wagers.

The states in which Penn owns sports-betting licenses: Arizona, Colorado, Iowa, Illinois, Indiana, Kansas, Louisiana, Massachusetts, Maryland, Michigan, New Jersey, Ohio, Pennsylvania, Tennessee, Virginia and West Virginia.

“Our primary focus is always to serve sports fans and we know they want both betting content and the ability to place bets with less friction from within our products,” ESPN chairman Jimmy Pitaro said.

“The strategy here is simple: to give fans what they’ve been requesting and expecting from ESPN.”

–Field Level Media