Standard General Pledges to Complete Chicago Casino if it Buys Bally’s

Posted on: March 15, 2024, 04:12h. 

Last updated on: March 18, 2024, 11:41h.

Todd Shriber @etfgodfather Read More
Expertise: Financial, Gaming Business, Mergers and Acquisitions.

Standard General said it will live up to Bally’s (NYSE: BALY) commitment to build a $1.1 billion casino hotel in Chicago should the regional gaming company accept the hedge fund’s acquisition offer.

Bally's
A rendering of Bally’s planned Chicago casino. Suitor Standard General said it will complete the project if Bally’s accepts its takeover offer. (Image: Crain’s Chicago Business)

On Monday, Standard General, which owns 23% of Bally’s equity, offered $15 a share to acquire the casino operator, or less than half the $38 a share it proposed in January 2022. The hedge fund is controlled by Bally’s Chairman Soo Kim. He noted the gaming company is contractually obligated to complete the integrated resort project at Chicago Tribune’s Freedom Center printing facility.

Kim added that Standard General is committed to the Windy City, and that its newest bid for Bally’s comes with the understanding that — should the offer be accepted — the suitor must follow through on the gaming company’s opportunities, which are led by Chicago.

Bally’s was awarded the license to developed the first casino hotel in the third-largest U.S. city in 2022 by former Mayor Lori Lightfoot (D-Chicago). But the aftermath of that decision has been riddled with controversy. In December, media reports surfaced that there may be multiple investigations, including one federal, into how the city awarded the permit to Bally’s. In January, local press outlets reported that the location for the planned hotel tower will need to be changed. That’s because neither the city nor the gaming company properly accounted for underground piping that could be adversely affected by construction.

Chicago Believes Bally’s Casino Will Be Completed

Should Bally’s accept Standard General’s acquisition bid, it’s possible that new ownership will make changes. But Chicago is confident a new owner won’t affect the operator’s plans in the city.

The proposed buyout offer does not impact Bally’s obligations to the city under the host community agreement,” a spokesman for Mayor Brandon Johnson said in a statement provided to Crain’s Chicago Business. “The city is confident in Bally’s ability to meet its obligations under the host community agreement and is in continuous dialogue with Bally’s to monitor the project’s progress.”

Bally’s becoming a private company could raise concerns about the operator’s will to follow through on a plan revealed last May for an initial public offering (IPO) of shares in the Chicago venue. Such an offering would be tied to the Host Community Agreement reached between the gaming company and the city, and provides for stakes in the integrated resort to be sold to select Chicagoans.

Earlier this week, Bally’s announced the formation of a special committee comprised of board members to evaluate the Standard General takeover proposal.

Financing Concerns Still Linger

Bally’s recently acknowledged it’s working to close an $800 million funding gap on the Chicago casino, and that it’s having conversations with potential creditors to ameliorate that situation.

The operator’s cost of financing could be high, because S&P Global Ratings last week lowered the gaming company’s credit grade further into junk territory to “B-“ from “B.” S&P believes Bally’s will procure the financing necessary to complete the Chicago venture, but added the gaming company faces risks.

“Bally’s financial policy decisions, including additional development spending, potential leveraging acquisitions, and shareholder returns, pose downside risk,” according to the research firm.