Bally’s Forms Committee to Mull Standard General Takeover Bid

Posted on: March 12, 2024, 02:33h. 

Last updated on: March 13, 2024, 12:10h.

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

Bally’s (NYSE: BALY) announced its board of directors has formed a special committee to evaluate the $15 per share takeover offer floated yesterday by Standard General — the hedge fund that owns about 23% of the casino operator’s shares outstanding.

Bally's
Standard General founder Soo Kim. Bally’s formed a special committee to evaluate the hedge fund’s takeover offer. (Image: New York Post)

The move was expected after Standard General, which is run by Bally’s board member Soo Kim, offered to acquire the gaming company for a second time. The hedge fund previously offered $38 a share for the regional casino operator in January 2022. Rhode Island-based Bally’s cautioned investors that formation of the special committee is not indicative of accepting the takeover proposal.

There can be no assurance that any definitive offer will be made or accepted, that any agreement will be executed or that any transaction will be consummated,” according to a statement issued by the company.

A committee was formed in 2022 to consider Standard General’s first takeover bid. But that offer was ultimately rejected. Bally’s shares rallied yesterday on news of the offer, which represents a 40% premium to the March 8 closing price, with those gains modestly extending today on news of the committee being formed.

Bally’s Could Decide Against This Offer, Too

It’s logical to wonder why, after rejecting an acquisition offer of $38 share, Bally’s would accept less than half that. Some analysts believe this time is different, while others don’t see competing bids emerging for the regional casino outfit.

Others believe Bally’s holds a strong portfolio of assets that generate earnings before interest, taxes, depreciation, amortization, and restructuring or rent costs (EBITDAR) well in excess of regional gaming peers. In a note to clients, Macquarie analyst Chad Beynon highlighted the company’s operating rights for Tropicana on the Las Vegas Strip and an upcoming Chicago casino hotel as some of the potential catalysts for Bally’s, while acknowledging the Chicago project is divisive.

“…high value creation opportunities including Trop (26 acres available at a value of $400-650m assuming $15-25m per acre),” wrote the analyst. “In our view, the polarizing issue has been Chicago, in which we estimate the permanent facility will eventually generate ~$250m of EBITDA. For reference, BALY management has discussed EBITDA in excess of the $250m range, which compares to Rivers Casino in Des Plaines, IL at ~$250-300m.”

Standard General’s new acquisition offer for Bally’s emerged just days after the company told Nevada regulators it’s attempting to source $800 million in financing to complete the Chicago integrated resort.

Standard General Selling Points

In a letter to Bally’s board, Kim highlighted advantages of the operator accepting his hedge fund’s takeover proposal. That includes an immediate premium for shareholders and potential risks to the gaming company in remaining a publicly traded entity.

He added that given Standard General’s long-running status as Bally’s largest shareholder, the suitor is already intimately familiar with the target’s operations, and that familiarity could speed up the deal if the offer is accepted.

“Based upon our experience and familiarity with the Company and extensive discussions we have had with potential financing sources, we do not anticipate any issues in securing financing for the transaction. In any event, the closing of a transaction would not be subject to any financing condition, and we would obtain a financing commitment prior to the execution of definitive merger agreement,” he concluded in the letter.