Bally’s Soars After Accepting Increased Takeover Bid From Standard General

Posted on: July 25, 2024, 02:01h. 

Last updated on: July 25, 2024, 02:26h.

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

Shares of Bally’s (NYSE: BALY) are higher by more than 25% in late trading after the regional casino operator accepted an increased takeover offer from hedge fund Standard General.

Bally's
Standard General founder Soo Kim. Bally’s accepted a revised $18.25 per share takeover offer from the money manager. (Image: Meet AC/Casino.org)

The acquisition bid values the gaming company at $18.25 per share, a more than 20% increase to the suitor’s original offer of $15 a share floated in March. Standard General’s new offer represents a 71% premium to Bally’s 30-day volume-weighted average price “prior to the initial Standard General proposal.” The proposed deal assigns an enterprise value of $4.6 billion to Bally’s.

After a detailed consideration by the Special Committee, with the assistance of our outside financial and legal advisors, it was determined that the Cash Consideration from Standard General delivers a meaningful and immediate value to stockholders,” said Jaymin Patel, chairman of the special committee tasked with evaluating the offer, in a statement.

Bally’s investors have the option to accept the $18.50 per share offer or retain their equity and remain investors in the soon-to-be privately held company. Standard General has already invested $500 million of the takeover cost.

Standard General Raised Offer for Bally’s, Still Below 2022 Bid

While Standard General — the hedge fund that’s Bally’s largest shareholder — increased its offer for Bally’s, it’s still far below the $38 per share acquisition overture made in March 2022.

On that basis, acceptance of the proposal may have caught some analysts and investors by surprise, though some noted that following Bally’s procuring funding for its permanent Chicago casino hotel, the acquisition offer was more likely to be accepted. The gaming company formally accepting the bid arrived about two weeks after it announced a series of transactions worth in excess of $2 billion that paved the way to move forward in Chicago.

“The transaction provides Bally’s stockholders with a significant cash premium along with certainty of value for their investment or, if they elect to retain their shares, the opportunity to participate in the longer-term growth prospects of our expanded portfolio and significant development pipeline,” said Bally’s Chairman and Standard General founder Soo Kim in the press release.

Related to the deal, Sinclair Broadcast Group (NASDAQ: SBGI), which became a Bally’s shareholder in late 2020 when the gaming company agreed to reportedly pay $85 million over 10 years to put its name on the media group’s regional sports networks, said it will support the takeover. That means “at least 47% of Bally’s outstanding fully-diluted equity interests will be rolled over into the combined company.”

How Bally’s Could Look Post-Acquisition

Under Standard General ownership, Rhode Island-based Bally’s will join Queen Casino & Entertainment Inc. as the hedge fund’s casino holding. Queen Casino owns four casinos — DraftKings at Casino Queen in East St. Louis, Il., the Queen Marquette in Marquette, Iowa, and the Queen Baton Rouge and the Belle of Baton Rouge in Baton Rouge, both located in the Louisiana capitol.

Combined, Bally’s and Queen Casino will run 19 gaming venues across 11 states. Kim previously said Bally’s would move forward with the Chicago integrated resort if the takeover offer was accepted. There has been some chatter that the hedge fund could sell Bally’s assets, including real estate, to raise cash, but that hasn’t been confirmed.  Some analysts noted investors could be frustrated by Bally’s decision to accept the offer because the stock has struggled since the operator rejected the hedge fund’s more lucrative 2022 bid.

“Bottom-line, we view the deal as likely frustrating for shareholders shortly following SG’s $38/share offer, but ultimately see BALY as better suited for what is essentially private ownership given high leverage & Standard General’s close involvement in capital allocation and long-term strategy,” noted Stifel analyst Jeffrey Stantial.