One of the country’s leading casino gaming companies is now considering a corporate buyout. Bally’s Corp. noted in a filing with the Securities and Exchange Commission on March 12 that the company has formed a special committee to study a preliminary, non-binding proposal by Standard General to acquire all outstanding shares that the hedge fund firm doesn’t already own.
Standard General would pay $15 per share, “as well as any potential strategic alternatives to the proposal.” The stock had traded in the $10 to $11 range over the last month before news of the acquisition surfaces. The offer would account to about a 41% premium on the shares and values the company at about $684 million.
“The current offer is significantly discounted from its prior offer of $38 per share made in 2022 that valued the casino operator at about $2 billion,” Reuters reported.
Details on the Deal
Bally’s was founded in 2004 and is based in Providence, Rhode Island, and owns and operates 16 casinos in 10 states, including New Jersey, Mississippi, Louisiana, Missouri, Illinois, Nevada, and more. The company also owns a horse track in Colorado and operates online sports betting in 14 states.
The company also won the bid for a casino in Chicago and opened a temporary facility in that city last year. The project has faced some struggles in recent months, however. The initial tax revenue didn’t meet city estimates, the plan for the new casino’s hotel changed, the bidding process has faced investigation, and now the company is searching for $800 million in financing to begin construction on the new casino.
The company also owns the Tropicana in Las Vegas. That property is to close in April as stadium construction is set to begin for the new home of the Oakland Athletics baseball team. Bally’ plans to build a new casino resort on the site after that is completed.
Winning the bid to land a license for a casino in New York City is also on the agenda. That list of projects may leave management looking to accept a deal that could possibly infuse more cash into the operation. Gaming analyst Brendan Bussmann told the Las Vegas Review-Journal that the list “may be a little bit more than they can handle at this point in time. It’s about execution and right now that seems to be in the balance.”
Facing Challenges
Standard General is based in New York and specializes in acquiring distressed companies and then turning them around. The firm is controlled by Soo Kim, who is already chairman of the Bally’s board of directors.
The move would take the company private at a time when the Bally’s share price has dropped considerably over the last year and the management is also working through the projects. Debt is also another challenge. Bally’s ended the final quarter with $163.2 million in cash and $3.6 billion in debt.
Kim alluded to some of those challenges in a letter to stockholders and noted that the deal would help alleviate some financial pressures Bally’s is facing.
“Our proposed transaction would allow the company’s stockholders to immediately realize a premium price, in cash, for their investment and provides stockholders certainty of value for their shares, especially when viewed against the operational risks inherent in the company’s business and the market risks inherent in remaining a publicly-listed company,” Kim noted.
Kim also noted that Standard General would abide by the recommendation of the special committee formed by Bally’s. That would include remaining as a shareholder. He said that as a key Bally’s stockholder, Standard management has a deep understanding of the company, which may be needed in efforts to boost performance in light of some of the obstacles ahead.
“As a result of our long-term involvement with the Company and its predecessor, we have a detailed understanding of the company, its business and assets, which will enable us to move quickly to negotiate and execute mutually acceptable definitive transaction documentation,” Kim noted. “Our due diligence will be limited to that necessary for our financing sources to complete their review of the company.”
In Chicago, Bally’s executives were still bullish recently on the prospect of finding funding for the project, but those efforts seem to align with some criticism of the bid including that the company didn’t have the funds to build the casino.
“Bally’s, of course, has consistently denied that they’re in trouble,” Alderman Brian Hopkins told the Chicago Sun-Times. “But the market speaks for itself. The market has depressed their stock valuation, and that they can’t hide. And you can extrapolate from that whether they’re going to be in a position to borrow the substantial amount of money they need for a construction loan right now.”
