The largest stakeholder of Bally’s Corp. made an offer today to purchase the remaining shares and take the company private.
The deal is valued at more than $2 billion and shares of Bally’s, a casino entertainment company, rose more than 20% in morning trading. The stock was trading as low as $26.40 on Monday and as high as $36.76 earlier today, trading under BALY.
In a letter to the Bally’s Board of Directors, Standard General, a New York-based investment firm whose founding partner and Chief Investment Officer Soo Kim currently serves as Bally’s chairman, submitted a proposal to acquire “outstanding shares of common stock of Bally’s Corporation we do not own for a price of $38 per share. Our proposal represents a 30% premium to the company’s closing price as of Jan. 24th, which we believe offers compelling value to Bally’s stockholders.”
Standard General, which currently owns 21% of Bally’s, wrote that the proposed transaction would allow the company’s stockholders “to immediately realize an attractive value in cash for their investment” and provide 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 public company.”
Bally’s did not comment today.
Standard General said the proposal would be subject to approval of Bally’s Board of Directors.
“It is our expectation that the Board of Directors will appoint a special committee of independent directors to consider our proposal and make a recommendation to the Board of Directors,” the letter said. “We will not move forward with the transaction unless it is approved by such a special committee.”
In addition, the transaction will be subject to a non-waivable condition requiring the approval of holders of a majority of the shares of the company not owned by Standard General or its affiliates, the letter said.
“Finally, given our existing position and history with the company, we will not need to do any due diligence to enable us to be in a position to negotiate and execute mutually acceptable definitive documentation,” the letter said.
Standard General said that as a result of its long-term involvement with the company and its predecessor, its executives have a detailed understanding of Bally’s, its business, and its assets, which will enable them to move quickly to finalize a transaction.
“We intend to fund the transaction through sale and lease back and other long-term financing arrangements,” the letter said.
If the deal is not approved, Standard General said it would remain as a long-term stockholder.
Wall Street analysts were quick to weigh in on the Standard General proposal.
David Katz, an analyst with Jefferies Equities Research, said, “The go-private offer highlights our view that the market is presently not pricing in value for digital gaming growth in the U.S., which suggests the $38 offer reflects the current value of the land-based business and the Gamesys earnings stream per our last model. The announcement brings to bear the market’s perspective on digital opportunities, for which BALY has compiled assets in advance of its execution.”
In October, Bally’s completed its $2.7 billion acquisition of Gamesys Group, the UK online gaming operator.
“With the current market context for dismissing value on North American digital opportunities, the offer is opportunistic,” Katz said. “However, the market has grown increasingly competitive among larger operators with considerable resources and Bally’s would be entering a partially formed landscape, which suggests our $16 per share in future digital value is longer term in nature than some peers.”
Barry Jonas, an analyst with Truist Securities, said the $38-per-share offer price (which compares to their $55 price target) “is just 9 times our 2023E EBITDA/12% FCF yield and would likely leave several minority shareholders underwater. We note Gamesys shareholders who elected stock consideration in October 2021 received BALY stock at $66/share. While it’s unclear to us if a deal gets done at $38, we see this as an opportunistic move by Standard General, given the market continues to re-rate lower. BALY shares are now moving higher this morning on the news.”
