Sinclair Broadcast Group Selling 7.91 Million Bally’s Shares

Posted on: April 12, 2024, 05:05h. 

Last updated on: April 14, 2024, 07:44h.

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

Sinclair Broadcast Group (NASDAQ: SBGI), the operator of regional sports networks (RSNs) that bear the Bally’s (NYSE: BALY), is selling 7.91 million shares of the casino stock.

Bally's Sinclair
A collage of Sinclair Broadcasting programming. The media company is selling Bally’s shares. (Image: The Bay Observer)

In a Form S-3 filing with the Securities and Exchange Commission (SEC) released Friday, Bally’s told investors it registered to sell 7.91 million shares on behalf of an entity known as SBG Gaming, LLC. Other SEC documents reveal SBG Gaming is a unit of Sinclair.

The shares of common stock offered hereby are being registered for the account of the Selling Stockholder. All net proceeds from the sale of the shares of common stock will go to the Selling Stockholder. We will not receive any part of the proceeds from such sale of the common stock,” according to the Bally’s regulatory document.

As of March 20, the gaming company had 40,426,353 shares of common stock outstanding, meaning the share sale registered on behalf of SBG Gaming is equivalent to 16.37% of that total as noted in the SEC filing.

How Sinclair Came to Own Bally’s Stock

Sinclair’s stake in Bally’s came about 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 RSNs.

Under the terms of that agreement, Sinclair also received a 15% equity stake in the casino operator and rights to own up to another 15% over time if certain financial objectives were met. At the time the deal was struck, Sinclair’s interest in Bally’s was worth about $137 million, but based on the stock’s closing price of $13.41 today, 7.91 shares fetch roughly $106 million.

It’s some, but not much compensation for Sinclair, which overpaid for the RSNs and has since grappled with the financial health of those networks.

Sinclair acquired the 21 RSNs from Walt Disney for $10.6 billion in 2019 as part of the latter’s efforts to divest some assets to gain regulatory approval for its acquisition of 21st Century Fox. At the time, the networks, which bear the Fox Sports name, were reportedly valued at least $16 billion.

Last November, Sinclair in partnership with Bally’s Chairman Soo Kim, reportedly offered $850 million to regain control of bankrupt Diamond Sports Group. Diamond is the holding company for the Bally’s-branded RSNs.

Sinclair Divesting Bally’s Stock at Interesting Time

The announcement that Bally’s is selling stock on behalf of Sinclair arrived about a month after Kim’s Standard General hedge fund offered $15 a share for the gaming company — its second takeover bid for the operator in which it’s the largest shareholder in two years.

Bally’s Form S-3 filing doesn’t disclose a reason why Sinclair is selling its stake and the media company has yet to comment on what its plans are for the proceeds.

“The Selling Stockholder will act independently of us in making decisions with respect to the timing, manner and size of each sale. Such sales may be made on one or more exchanges or in the over-the-counter market or otherwise, at prices and under terms then prevailing or at prices related to the prevailing market price or at negotiated prices,” said Bally’s in the regulatory document.