Bally's valued at $2.07B in new buyout offer from largest shareholder; stock jumps over 20%

Shares of casino operator and gaming company Bally’s Corp. jumped more than 20% on Tuesday after hedge fund Standard General LP, the largest shareholder of the business, submitted an offer to buy the remaining stock it doesn’t already own for $38 a share, reports Wall Street Journal. The deal values the company at about $2.07 billion.

New York-based investment firm Standard General, which already owns a 21% majority stake in Bally’s, submitted on Tuesday a letter to Bally’s board detailing the offer to buy the remaining stock. The casino operator disclosed the proposition in a filing with the Securities and Exchange Commission. Bally’s Chairman Soo Kim is the founder and managing partner of Standard General: the proposal text is signed by him. In the letter, Kim says that, should the offer be rejected, the equity firm intends to remain a shareholder and that the decision would not adversely affect the future relationship between both parties.

“On January 25, 2022, Standard General delivered a non-binding letter to the board of directors of the Company proposing a transaction under which it would acquire all of the outstanding shares of common stock not currently owned by Standard General at a price of $38.00 per share,” the filing reads.

The filing further explains that, in its proposal letter, Standard General stated it expects that the board of directors of Bally’s “will appoint a special committee” of independent directors to consider the proposal and afterward make a recommendation to the board. No assurances can be given that a transaction will be consummated.

“Standard General will not move forward with the transaction unless it is approved by such a special committee,” the text reads. “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.” 

Standard General’s offer represents a premium of 30% to the company’s closing price as of January 24, which the investment firm believes “offers compelling value” to Bally’s stockholders. The transaction also provides stockholders “certainty of value for their shares,” especially when viewed “against the operational risks inherent” in the company’s business, the proposal reads.

The private equity firm intends to fund the transaction “through sale and lease back” and other long-term financing arrangements. Based upon its experience and familiarity with Bally’s and financings for businesses of this type, Standard General does “not anticipate” any issues in securing financing for the transaction.

According to Bloomberg, Standard General may be getting “a bargain” with Bally’s shares down 60% from their March highs. In addition to pressure amid the ongoing pandemic, which hurts customer traffic, Bally’s has also gotten a relatively slow start in the US online betting market.

Rhode Island-based Bally’s has properties in its home state and others, including New Jersey, Mississippi, Colorado and Nevada, where it operates Bally’s Lake Tahoe. It announced last April that it reached a deal to acquire the Tropicana in Las Vegas from the resort’s landlord, Gaming and Leisure Properties, in a deal valued at about $308 million. Bally's is also bidding to open a new casino in Chicago.