Bally's largest shareholder Standard General proposes $648 million buyout

Bally's Chairman Soo Kim and New York hedge fund Standard General are making a strategic move to acquire the casino company. Standard General, the major shareholder with a 23% stake in Bally's, has proposed an offer to take over the remaining shares at $15 each, putting the company's valuation at approximately $648 million. While this offer stands as a premium to the current share price, it marks a substantial decrease from Standard General's bid of $38 per share in 2022.

“For whatever reason, the shares have not traded well. There’s nothing more that we can do, other than speak through action, and our action is to multiply down on our commitment to this company and buy shares at a healthy premium to current shareholders,” Kim was quoted as saying in a Chicago Tribune report.

In the wake of Bally's triumph in securing rights for Chicago's first casino in 2022, Standard General's initial bid valued the company at nearly $2.1 billion. However, Bally's stock has experienced a downward trend, exacerbated by financial challenges linked to the construction of its proposed $1.74 billion Chicago flagship.

Kim attributes the decline in valuation to various factors, including concerns about Bally's financial condition and broader economic challenges like inflation and higher interest rates. As of the fourth quarter's end, Bally's reported $163 million in cash and carried a debt of $3.6 billion.

The casino company faces an $800 million funding gap to cover the remaining $1.1 billion required for the permanent casino at the Chicago Tribune's 30-acre River West site. Despite these financial hurdles, Bally's Chicago plans to commence construction at the Freedom Center this summer, with the permanent casino slated to open in 2026, the report said.

The company received final planning and zoning approval from the city in December 2022 for an expansive entertainment complex, including an exhibition hall, a 500-room hotel, a 3,000-seat theater, 10 restaurants, and 4,000 gaming positions. In January, Bally's revealed the need to relocate the 500-room hotel tower to prevent damage to city water pipes near the Chicago River.

Bally's has committed to spending at least $1.34 billion on building the temporary and permanent casinos in Chicago, fulfilling obligations outlined in the host community agreement. While Kim acknowledges that the actual project cost will surpass the proposed $1.74 billion, certain expenses such as the $200 million Freedom Center land purchase, $150 million Tribune relocation payment, and additional fees are not included in the hard building costs.

Standard General's bid to buy out other shareholders was rejected by a special committee of Bally's board in May 2022. However, the hedge fund remains committed to Bally's and the Chicago casino project. Bally's owns 16 casinos across 10 states.

Bally's Chicago, currently operating from Medinah Temple, generated nearly $10 million in adjusted gross receipts and over $1 million in local taxes in February. However, it still has a significant way to go to meet Chicago's revenue projections for 2024, with the city expecting nearly $243 million in adjusted gross receipts, contributing around $35 million in local gaming taxes.

The construction of the permanent Chicago casino remains pivotal to achieving the city's and Bally's goals. Kim emphasizes a redoubled commitment to the company, highlighting the potential upside of the Chicago project. While awaiting the special committee's review of the buyout offer, Kim asserts that even if the deal is not approved, Standard General remains dedicated to Bally's and the Chicago casino "for the long term."