A few days ago, Penn Entertainment (NASDAQ: PENN) announced a $2 billion deal with ESPN, sending shockwaves around the sports betting world. Let's look at Penn's partnership with the Disney-owned sports network, and why this deal could make sense for both parties in the long term. 

Penn Entertainment has long been a staple of the betting industry. However, a few years ago the company made headlines after acquiring media company Barstool Sports for over $550 million. The rationale behind the deal was to combine Barstool's brand with Penn's operations and create a new online sportsbook geared toward competing with industry juggernauts and FanDuel.

After three years of working with Barstool Sports, Penn has decided to go in another direction. The company recently announced that it formed a joint venture with sports network ESPN. Per the terms of the transaction, Penn will pay ESPN $1.5 billion in cash over a 10-year period. ESPN was also granted $500 million in warrants to purchase 31.8 million shares of Penn stock over the 10-year term.

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Source Fool.com